From Binary Options Wiki
When making an investment, you are basically making a deal with an amount of capital chosen by you, with the desired outcome earning you a mark-up on your original sum.
When you invest in regular stocks you are actually buying a piece of ownership into that company or business and so have claim to a part of their earnings and assets. Therefore, if the chosen company is not doing so well, your ownership would be worthless.
Different from stock investments, when you invest with binary options trading, instead of buying stocks out-right you are simply purchasing a contract to the asset which claims you the right but not the obligation to purchase the asset. So instead of waiting for a lucky break in your chosen stock like in regular purchasing stocks, with binary options you are simply predicting the movement of the stock, whether it will rise or fall from it’s original purchase price.
The amount you could earn is pre-determined from the onset and so even an out-of-the-money result would lose you nothing more than your original premium. Also known as a ‘no tears’ investment.