There are two types of options contracts: vanilla options and binary options. Even though both categories of options 
contracts have some features in common, there are some individual features that set them apart. Some of these differences are why vanilla options are preferred over binary by some traders.
Trade Format
Binary options are quite limited in the opportunities available to traders to trade the markets. Vanilla options allow traders various trade types which may be used to trade various scenarios in the market. For instance, straddle and strangle strategies may be used to trade scenarios where price action is not moving at all and stuck in a range. There are even strategies for moderately bullish/bearish or heavily bullish/bearish market scenarios.
These conditions cannot be adequately traded with binary options. With Binary there are only two trade outcomes from which the trader can only choose one, therefore restricting their ability to take advantage of different market conditions. Trade types in binary options are also more complex than those used for vanilla options. This may not make it too friendly for new users.
Long Term Expiry
Not every trader likes to open and close trades in a highly speculative fashion. This is what the binary options market is programmed to do. Traders are expected to open and close trades with short expiry times. This may increase risk. How can a clear trend be determined and used for any kind of analysis in 60 seconds?
In contrast, vanilla option allows traders to set expiry times for up to 3 months. There are also variations which allow for closure of trades before expiration without the kinds of fees that binary options brokers charge for the use of such facilities.
Predicting asset direction may be easier when the trader has the opportunity to set a longer expiry time.
Charting
Vanilla options platforms come with charts that are interactive and permit a great degree of technical analysis to be done on them. In contrast, the charting packages of binary options platforms are rudimentary and hardly allow for any meaningful analysis to be conducted on them.
Payout Structure
Vanilla options payouts are a function of price differential in the market value and the expiry value, as well as the number of contracts traded. Therefore payouts can be influenced by having a larger differential between market price and expiry value, as well as the level of number of contracts traded. This is not the same for the binary options market where the payout is fixed from the outset and is not affected by the degree of change of the price at trade entry and trade closure.
Conclusion
In terms of advantages, trading vanilla options may present better ways of trading the financial market option-style than binary options. The tools offered on vanilla options platforms are also more advanced extending the ways in which a trader may take advantage of the markets.
Risk warning: Forward Rate Agreements, Options and CFDs (OTC Trading) are leveraged products that carry a substantial risk of loss up to your invested capital and may not be suitable for everyone. Please ensure that you understand fully the risks involved and do not invest money you cannot afford to lose. Our group of companies through its subsidiaries is licensed by the Cyprus Securities & Exchange Commission (Easy Forex Trading Ltd- CySEC, License Number 079/07), which has been passported in the European Union through the MiFID Directive and in Australia by ASIC (Easy Markets Pty Ltd -AFS license No. 246566).
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