Binary options – also known as "digital options" or "all-or-nothing options" – are options that pay a pre-determined, fixed amount, depending on whether or not an event occurs at the time the option expires. As the name implies, binary options can have only one of two possible outcomes and allow you to take a simple "Yes or No" approach. For example, will the AUD/USD finish above the current price at the end of the hour? If "Yes," the binary option settles "in-the-money"; if "No," the binary option settles "out-of-the-money". Like traditional options, binary options are based on an underlying asset such as currencies, stocks or commodities. But unlike a contract for difference (CFD) or spread bet, a binary option does not require margins or stops and you know exactly how much you stand to gain or lose from the outset. Binary options are simple, and they are ideal for the trader who wants the potential for significant, short-term gains with strictly limited risk. Risk Warning: Trading binary option is highly speculative and involves a significant risk of loss.