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Let’s take the complying with inquiry as an example: Will the rate of gold be above $1,250 at 1:30 p.m. today? If you think it will be, you buy the binary option. If you believe gold will be below $1,250 at 1:30 p.m., then you market this binary option. The cost of a binary option is constantly in between $0 and also $100, and also similar to various other monetary markets, there is a bid as well as ask cost.
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This is called remaining in the money. Yet if the rate of gold is listed below $1,250 at 1:30 p.m., the option runs out at $0. For that reason you lose the $44.50 invested. This called out of the cash. The proposal and also offer change till the option expires. You can shut your placement any time before expiration to secure an earnings or a lower a loss, compared to letting it expire out of the money.
Thus, each binary option has a total worth potential of $100, and it is a zero-sum video game– what you make, somebody else sheds, and also what you lose, somebody else makes. Each trader should set up the capital for their side of the profession. In the examples over, you bought an option at $44.50, as well as somebody offered you that option.
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