Binary option is a type of contract for a specific underlying asset. The buyer of the contract invests a certain amount of funds and buys it. Also for binary options the price of the underlying asset at the time of purchase is as important as at the time of expiration. In the most simple digital options the profit of the trade depends on the value of the asset at the time of expiration (higher or lower than at the time of purchase).
If you purchased a Put option, the trader makes a profit only if the price of the asset at the time of expiry is below the price of the asset at the time of purchase of the option. Everything is opposite with the Call option. The profit requires that the price at the time of expiration has to be higher than the price at the time of purchase of the option. Nothing complicated.
Original infographic by Binary Options.
