Fundamental Knowledge (1) What is Binary Options
Binary options are financial derivatives that allow you to predict, by a specific date and time, whether the price in a market will move in one of two directions.
Markets covered are varied, but on this Investment Guide+ we feature IG Securities' Nikkei 225 binary options, based on the Nikkei 225 price.
There are three types of Nikkei 225 binary options.
Ladder option
A trade that predicts whether the rate at a certain time (the evaluation time) will be at or above a set price, or below it.
If you predict that it will be at or above the set price at the evaluation time, you place a "buy" order; if you predict it will be below, you place a "sell" order.
In Nikkei 225 binary options, the evaluation time is the market close.

One-touch option
A trade that predicts whether the price will reach (or not reach) the set level at least once before the end of the trading period.
If you predict that it will reach the level, you place a "buy" order; if you predict that it will not reach, you place a "sell" order.
Once the set price is reached, the trade ends immediately at that time.
In Nikkei 225 binary options, the end time of the trade is the market close.

Range option
A trade that predicts whether the price will stay within (or depart from) the range between two set prices up to the end time.
If you predict that the range will be maintained, you place a "buy" order; if you predict that it will not be maintained, you place a "sell" order.
If the price exits the range, the range is considered not maintained, and the trade ends at that time.
Note that, in Nikkei 225 binary options, the center rate of the range is the previous day's closing price, and the end time is the market close.

The diagram is quoted from IG Securities' homepage.
In reality, trading with various option settings becomes possible at the opening (precisely 9:03). Options can be purchased or partially settled until 14:59. And at 15:00, the Nikkei Stock Average determines auto-settlement for all positions. IG Securities' Nikkei 225 binary options are for day-trading only; positions cannot be carried over to the next day.
Basic knowledge (1) What is a binary option
Basic knowledge (2) How option prices are determined
Basic knowledge (3) Binary option glossary – IG Securities-specific terms – and how to read trading results
Basic knowledge (4) There are three trading styles
Advantages of Nikkei 225 binary options
How to open a demo account
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