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These types have been available over the counter. In 2007 your options Clearing Corporation proposed a rule change to allow them. This was approved by the Sec and Exchange Commission (SEC), and thus trading in binaries began on the American Stock Exchange and the Chicago Board Options Exchange in 2008. Additionally buy them for foreign exchange trades.
Quite simply, they’re called “binary” because there are only two, either-or outcomes. In the event you win, people win one set amount of cash. If the underlying security’s market price isn’t in the money by expiration, you lose the cash you paid.
They’re also called all-or-nothing, electronic digital, together with fixed-return options (people listed on Amex). Most of them are European-style, which means you can’t exercise an option until after expiration. Generally, American-style binaries are exercised automatically if the underlying security touches your strike price.
Their price is set by the market’s estimate with the probability that the underlying’s selling price will reach the attack.
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