A binary option is a financial trading method. The payoff for binary options is either a fixed amount or nothing. The fixed amount can be in the form of cash or assets, but it is typically cash. Trading in binary options is essentially a wager regarding whether or not the price of a particular asset will go up or down. If the trader believes that the price will rise, then he or she will purchase that option. If the trader believes the price will decrease, then he or she will sell that option.

For example, a Recognize might purchase an asset for 55 dollars at noon while the asset is worth 2,000 dollars. The expiration time is at one PM. If at one PM the asset is worth 2,001 dollars, then the option is worth 100 dollars. The trader makes a profit of 100 dollars minus the 55 dollars he or she spent on the option for a total of 45 dollars minus any applicable fees to his or her broker. In order to make a profit, the value of the asset just has to increase its initial worth. It does not matter whether its value increases by a fraction of a cent or 2,000 dollars. However, if the value of the asset decreases, then the trader does not win anything and also loses his or her initial investment.