Stocks are singular companies which, when combined, form a given index. In traditional stock market trading, an investor only makes money if the stock is sold at a price higher than the buying price.
In binary options, however, things work differently. A binary options trader can make money from trading stocks by simply speculating about its eventual direction at the end of a specified time period.
If an investor places a Call option when trading stocks, this means that he/she is predicting that at the expiry time, the market price will be higher than it was at the strike price. If the prediction is correct, then the trade is said to be In The Money – and the trader makes profit on top of the initial investment amount .
If one places a Put option on a specific trade, this means that he/she is predicting that at the expiry time, the market price will be lower than it was at the strike price. If the prediction is correct, then the trade is once again deemed to be In The Money – and the trader makes profit on top of the initial investment amount.