# BINARY OPTIONS. Getting Started. Understanding. Lesson01. Basic Terminology. What are the basics involved in binary options trading?

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5 How Does it work? Example: It's 1:15pm and Gold is trading at 1, Positive economic news on US jobs is moving the US dollar up, and you believe that gold prices will fall as investors move their money out of safety and into higher profit US assets. Current payout on the trade is 81%. You believe gold prices will fall below current levels and execute a \$100 trade or Put Option for 2:00pm expiry. The strike price on the trade is 1, You were right and gold prices closed at 1,203.80, below the strike price of 1, In this case the in-the-money payout is 81% of our trade so you win \$81: \$100 x.81 = \$81 If you were wrong and gold prices closed above the strike price of 1,204.3, say , you would receive back the out-of-the-money payout of 10%, in this case \$ x.10 = \$10 Binary options trading are based on limited risk, meaning in the above example \$90 represents the maximum loss on that trade. 4

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