A binary option is a prediction of which direction the price of an underlying asset will take by an expiry time. For example, if the price of gold is currently 1500, will it rise or fall by 5:00 PM? If the trader predicts correctly, he will receive the full payout stated in the contract. With a binary option, the trader never purchases or sells an asset, he merely predicts the direction, and the trade expires in-the-money even if he was only right by a single pip. Binary options are a safe way of trading, as the risk/reward is known from the outset. Payout structures vary, and are usually between 70% - 550% of the investment amount (depending on the type of option). Binary options have been growing rapidly in popularity since 2008, and became regulated by CySEC in 2012. What is an Underlying Asset?