What is a binary contract?
And why is a binary contract different than a binary options?
A binary contract is an agreement between a buyer and seller in which the buyer has the right to buy an underlying asset at an agreed upon level.
At Daweda Exchange, both the buyer and seller deal directly with each other, and they are both traders, just like you. If you are the buyer, this means that you believe that the underlying asset will be higher at the expiration of the contract than the level at which you purchased it. Conversely, if you are the seller, you believe that the level of the underlying asset will be lower at the expiration of the contract than it was when you sold it. For example:
Let’s assume that you are the buyer in this example and that you buy a contract ($10 value) whose underlying asset is Apple at the level of 105. This means that you believe that by the expiration time of the contract, the level of Apple will be higher than 105. If the level of Appel is higher than 105 when the contract expires, you will get a 100% return on your investment. Let’s assume that in our example Apple’s level is 106 when the contract expired. Since you bought one contract at $10, your profit is $10, and the total balance in your account will be $20 (the $10 invested and the $10 profit).
Remember – when you buy a binary contract you DON’T buy the underlying asset, but rather the option that the underlying asset will be higher than the levelk at which you bought it.
What is the difference between a binary option and a binary contract?
A binary contract is a contract between two independent traders. One trader is a buyer and the other is a seller. At Daweda, we moderate the trade, by helping buyers and sellers to meet and agree on a contract. We guarantee the funds exchange between both parties to the contract, but we do not actually participate in the trade – all contracts are signed only between the traders.
Unlike binary options, in a binary contract the buyer and seller mutually decide the level of the trade and the amount of money they are willing to invest. Unlike binary options, in a binary contract on the Daweda exchange you can enter an order in our order book, and wait for the price you chose to be available. Unlike binary options, in a binary contract on the Daweda exchange you can even hedge your investment, choosing to enter a position in the opposite direction of your original trade, in order to protect the investment.
All of these features are not possible with binary options.
Question: If Daweda exchange is just a market for binary contracts, and does not take part in the trade activity, how does the company make a profit?
Answer: At Daweda, we believe that in order to make the trade truly fair, we allow the traders to take total control of their decisions. We are not a party to the trade, and we are not trading against either the buyer or seller.
We do take a small fee – the lowest in the industry – for each contract that is traded in the market.
The fee is charged only for actual positions taken, and we do not charge a fee for an order in the order book that was not picked up by a counter party.