Binary options are financial instruments which essentially can be based on any underlying asset, and where there are only two outcomes. The potential payout or loss is predetermined, and the only two outcomes are thus that the trader either wins or loses this amount. The underlying assets generally used for binary options trading includes stock indices, major forex pairs, and some commodities.
Binary options trading may be offered by both ECN forex brokers and other types of brokers as one of the instrument categories they have available. However, due to recent crackdowns by regulators in several countries, including the European Securities and Markets Authority (ESMA), binary options have been banned in the EU and some other countries.