After the recession, binary options has come as a sigh of relief for the trader who otherwise face big losses. Binary options are a quick way of earning money with small investment in a short span of time. The various advantages and easy to understand, binaries are attracting people from every nook and corner of the world. The most attractive part of binaries is that there is no need to have good experience and even a new trader in the market can trade binary options without much fear. They are fixed odds trading where the trader has to estimate the direction in which the asset may move. No buying of shares, so no big money needed to start.
Binary options also known as digital options are very close to European options trading. Binary options depend on two events to happen; 1)(the estimation that the event will happen, and 2) it should happen by a certain time period. Binary options are employed in assets, commodities, forex, stocks and indices. The probability of the event to occur is the basic of binary options. The simple logic behind the trade is that if the event settles at or above the price, you had estimated, you get a payout that is fixed at the on set of the option. If the event does not happen you get nothing, so the name binary options.
Binary Options How It Works
In American style options, the profit is gained if the strike price of the option is achieved even if the expiry time has not yet come. The American binary options are a bit different from that of European options. In American options you are required to cross the price at which the option is bought and the degree of correctness of your estimation also maters to achieve profit. Binary options are traded mainly in Europe and their trading in the US is yet illegal.
Since binary options are traded with two possible results to occur, the trader knows in advance his potential profit and loss. This factor makes the trader to trade free of mind as he does not have to put another amount if the trade is not successful. In binary options, the investor does not have to buy stock or shares pf any company, but he is expected to estimate the in which direction the asset may move. The profit or loss depends on the movement of the asset in the market, above or below the strike price, before its expiry time. The result of the trade is termed in two ways; 1) ‘in the money option’ and 2) ‘out of the money option’. If the trade ends with a positive note, it is considered in the money and if the event does not happen, it is considered as out of the money option.
The payouts in binary options are much more than one can imagine. A successful trade can give you 65% to 75% more than you have invested. It is a different thing that you get nothing, if your option ends up ‘out of the money’. This also can be consoling because some brokers give you back 15% of the investment thus narrowing your loss.
All About Binary Options
Binary options have provided traders additional advantages and a new option to invest and make profits from financial markets. Because of its simplicity, Binary options are gaining immense popularity among the traders around the globe. Just like the name ‘Binary’ suggests, there can be only two outcomes, either the investor gets a payout or he gets nothing.
One of the main advantages of trading in Binary option is that the investor gets more flexibility while trading which is not possible with traditional options. The advantage of earning huge profits in a short span of time becomes the main attraction to trade in this option. With so many benefits and advantages over the traditional options, it is not surprising that more and more traders are now opting to trade in Binary options rather than in traditional options.
Generally it is a norm among the investors to associate Binary option trading only to stock market. But this is not the case. Investors can trade in all the financial assets including commodities, forex, stocks or indices. This array of options provided by Binary option helps investors to spread their risks and stabilize their portfolio. The investor has to predict the direction of the price movement of the asset and if the prediction is found to be right, the trade is set to be ‘in-the-money’. If the trade expires ‘in-the-money’ then the investor earns a profit and gets a predetermined payout. If the trade is not successful and the market doesn’t behave according to the investor’s prediction, the trade is set to be ‘out-of-the-money’. When the trade expires as ‘out-of-the-money’, the trader gets nothing and looses all the money that he had invested.
As the number of investors interested in trading in Binary option is increasing at a rapid rate, the number of brokers offering platforms for Binary option trading is also swelling. So, an investor will not have any trouble finding a good broker who provides online facilities to facilitate Binary option trading.
Binary option is considered to be very simple to trade in. The reason behind this consideration is that while trading, the investor just has to take a judgment as to whether the price of the asset will rise or fall at the time of expiration of the contract. It doesn’t matter by how much is the price rising or falling. The direction of change is important and not the magnitude. In traditional options, even the magnitude of change is important as it is one of the factors that affect the potential profit or loss. To take a judgment regarding the direction is relatively easier than judging the magnitude. This difference makes Binary option trading simpler than the traditional option trading.
Even the initial investment required to earn considerable profits is small in Binary option trading. An investor can start his trade with a small amount and even then earn a handsome profit which is not possible in case of traditional options where the investor requires good capital to earn reasonable profits.
Binary or Digital Options Trading Strategies
Since binary or digital options trading is picking up memento, new strategies how to earn more and more money, are also surfacing in the trading circuit. Both new and experienced and the brokers in the line are trying their best to make this trading tool more beneficial. It is also a fact that the increment in the speculations will lead to the increase of risk. Since the risk factor in binary options is known to the trader, the number of strategies to lessen the risk is also increasing. In order to make the trade successful, it becomes important for any trader to know the strategies and working of the market in advance.
Binary options trading depend mainly on two facts; a call or a put option. To make the option succeed, you simply can buy a call option or a put option. For example, if you place a bet on USD/EUR thinking that the strike price will cross certain limit before its expiry time, you should go for a call option. The option can come to an end before its expiry time and the extended movement of the market does not have any effect on the option’s result because the profit or loss is prefixed. If your estimation is correct and the option crosses the strike price before it expires, you are in the money and a fixed payout will be deposited to your account. The payout that you win from the option can be somewhere between 65% and 75%, which means if you spend $100 on an option, you will get $165 or $175 on a successful trade.
On the contrary, if you think the price of the option will move below the strike price, you can choose a put option and the result related with the option will be same as it is in a call option.
Buying both, a call option and a put option is another strategy that can bring reward. This keeps the investor in the middle of the option. If they are losing on one option, they can win with the other. You can call it hedging as well. If the investor thinks that the option is heading against his estimation, he can choose the other way thus limiting his loss.
The other way to make more money with binary options is to buy the same option again and again. If you think that the option is heading towards your estimated price, you once again can buy another asset. This way you can double your profit without investing more. Only those, who are in this line for a long period, can try these types of strategies because they understand the trade in depth.
There are numerous binary options strategies that an investor can rely on but he needs to have full knowledge of the financial market and its working as well. Although, binary options trading are easy to understand, the basic knowledge of the trade is must. You can take the help of numerous platforms that are always ready to give you advice at any given time of the day.
Facts and Misconceptions about Binary Options
Nowadays, one can see various platforms advertising binary options trading on the net. The reason is very simple – gaining 60% to 75% straight profit from only one transaction which is not an ordinary thing. If the binary options expire with ‘out of the money’, you are paid back 15% of your investment. All these benefits seems to be impossible but it is the real truth that betting with binary options can fetch you a very big reward in a very short span of time. Some of the people might not believe this but here are some truths and myths that may change your mind about this new tool of trading in the financial market.
Misconception: It is not possible to earn high returns with binary options.
This is the most irrelevant myth to think that binary options can not offer high returns. Those, who have studied the market thoroughly and have good experience, can make good money in this market. the biggest advantage that makes binary options the most sought after trading tool is that the trade does not need to predict the probability of market’s movements. If you can just recognize the instability and you are able to predict if the asset will go high or low before its expiry time, you can finish your option ‘in the money’. Only one pip in the right direction is enough to make profit and receive full return.
Misconception: One needs to have the knowledge of the financial market in depth.
In order to trade binary options successfully, you need not to have much knowledge about the market. All you need to know is in which direction the asset will move. For this, you need to read the news papers or financial magazines for a couple of hours everyday which every person who is interested in financial market does. To become a member of an online platform that deals in binary options is not a difficult job. These platforms also provide their customers with the day-to-day happenings of the market which makes it easier for the traders to trade. You may not believe it but it is as simple as that. With a click of your mouse, you can start trading binary options.
Misconception: you have to keep a watch whole day sitting before the computer.
Binary options have become popular because one can trade them while sitting in the comforts of one’s home. Unlike traditional trading, there is no need to sit before your computer whole day. Once, you have bought the security, your work is over. You can check the results once the expiry time of the option is over. Also, many binary options platforms inform their customers through SMS.
Fact: It is right if your estimation goes wrong, you get b15% of your invested money back. If your estimation goes correct, your profit is automatically deposited to your account which means if you invest $100 and the option expires in the money, a payout of $170 is automatically deposited without charging any fee. Some platforms offer special offers on the weekends. You may even get some extra money from some platforms if you deposit certain amount in your binary account.
If you want to check before you invest, you can check with any binary demo site.
You can simply register for a demo account at IQoption and use your free & unlimited demo account to practice and gain experience in trading binary options. Be sure that your first trading experience will be a good and safe one!