Binary Option

A binary option, also called a digital option, is a derivatives contract that pays a fixed, predetermined amount if a specific condition is met at expiry — and pays nothing if the condition is not met. Unlike conventional options where payoff varies with how far the asset moves beyond the strike, binary options deliver an all-or-nothing outcome. For instance, a binary call on Reliance Industries may pay ₹100 if the stock closes above ₹1,500 at expiry, regardless of whether it closes at ₹1,501 or ₹1,800. Binary options are primarily an institutional and OTC instrument in India. SEBI has restricted retail binary option trading due to concerns about speculative misuse and the difficulty retail investors face in pricing these instruments accurately.