A binary option is a bet on whether a price will be above or below a level at a set time: a fixed payout if right, the whole stake lost if wrong.
A binary option is a contract with two outcomes. You choose an asset, a direction ("higher" or "lower") and an expiry time, most often from 30 seconds to a few minutes. If you are right, the platform pays a fixed 70-90% of the stake; if you are wrong, you lose the whole stake. A binary option gives no right to buy or sell the asset.
Because the payout is smaller than the possible loss, every trade loses money on average: with an 80% payout you need to be right on more than 55.6% of trades just to break even. The platform is usually the client's counterparty, so it earns on the client's losses. For these reasons the EU, the UK, Australia, Canada and Israel have banned the sale of binary options to retail clients.
In Ukraine, binary options platforms usually operate from abroad without a licence from the NSSMC, and the Commission has added several of them to its list of questionable investment projects.
In detail, with examples: Binary options and trading signals: how they work and why people almost always lose money
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