Understanding Binary Options

There are many people who come across the term binary options, but do not have an in-depth idea of it. Although it might seem to be something relatively new, these are said to be traded for more than a decade and originally thought to be traded over counter generally between two and more institutional investors. It includes mostly investment banking and hedge funds. The retain traders were said to be granted rights to trade the binary options only from 2008 onwards. Since, then its popularity is on the rise and is presumed to go over the roof.

About binary options

Binary options could be best summed as trade, which offers just two distinct outcomes. It is either the trade finishes in money (winner) or just out of money (loser). However, this is said to be in start contract towards the traditional available vanilla options where the concepts like volatility, time decay (theta), time to expiration, strike price, all of them which go into pricing.

How does it work?

These are considered to be ordinary risk reward proposition that is clearly stated before entering the trade. Most trading sties do place return percentage around 60% – 90% for winning the trades and around 0% – 15% on return of capital in regards to losing trades. Generally binary option signals are offered on different underlying assets across various trading platforms.

Stocks on offer

We have noticed that stocks also called equities are provided across many platforms. However, the stock numbers are limited. The stocks typically are only offered on the biggest and most liquid names like Google, Apple, Microsoft, JP Morgan, Intel, etc. Technology stocks also make up a majority of binary options that are stock based. Also, you can find popular commodities like silver, gold, natural gas, oil, copper and other major indexes all over the globe which can be found on several trading platforms.

Binary Options: Its Origins

When IG Index, the British organization that deals with sports betting and financial derivatives, introduced in 2003 binary options betting, the investors found that a good amount of profit can be made by utilizing simplified betting system. These days, binary options betting are being offered to the general public by various companies. This industry is rather said to have adopted the standard investment and trading terms for making it much appealing to financial and investment community. Hence, binary options are bet (traded) on stocks, currency, commodities or indexes by using several terms that are associated with commodities, Forex and stocks trading.

Simplified trading

As a matter of fact, binary options has simplified trading for those investors, who are on the constant move and trade is possible to be executed in just 3 clicks of the mouse. You do not have to wait any longer over the longer term trends, and agonize over in-depth financial analysis.

Trading made easy

With binary options and termed as digital options, you can deal within an hour’s time frame for transaction life. Moreover, you can also determine to check if the transaction price would go down or up within that specified hour. In reality, it does not have any kind of physical product such as stock certificates.

Unknown Facts About Binary Option Trading

The binary options account is a good trading platform, which is quite suitable for the new traders. Many people do not trade with their savings on such platforms, because they fear for a lot of complications.

What is binary option trading?

To understand the facts about the digital option trading, it is important we analyze what it is actually. The digital option is a contract, the investor initiates, with regard to the underlying commodities like gold, silver or various currencies. The investor has to predict the rise or a fall in the prices of the commodities, in order to get into such a contract.

Digital options in depth analysis

This contract is known as binary because, it possesses only two situations, which is a gain or a loss. There is no room for other possibilities. However, there is a provision in the digital option contract form. The provision allows user to safeguard his profits and prevents loss in case after the expiry of the contract. This feature depends on the strike price set in the contract. Thus, it is important to make proper research and decide on the right strike price.

Verify the brokerage firm’s terms & conditions

Many people are unaware of this feature, of the digital options. The brokerage firms or brokers capitalize on the same and do not allow the users, to prevent huge loss on their investments. The contract process and the specified terms & conditions are extremely essential. They need to be given extreme importance, before trading.

Care and precaution

Any decision should be made with care especially, when the money is invested in the highly volatile markets or commodities. Heavy fluctuations are a part of such commodities and markets. It is important to consider all factors and decide about securing profit or preventing loss.

Easy documentation

The documentation process of opening digital options trading is extremely simple. This reduces a lot of complications and headaches from an individual. Apart from this, the facility of demo accounts, provided by most of the stock brokerage firms, is quite exceptional and facilitate practical learning experience, before beginning the trade with our savings. These demo accounts are free and no charge for processing or formation is charged by the users.

Training

Many people might not be aware that, many reputed brokerage firms, provide a few short term training courses for their potential investors. It is important to consider them, if you are a new trader. These courses are cheap and extremely informative. Many unknown facts and tips are provided to facilitate better trading experience and enhanced money earning chances.

No per transaction fee

The brokerage firms do not have a scheme of charging a specific amount, based on the number of transactions, you involve in. It is generally a fixed amount and not related to other variables, such as transaction amount, number of transactions, etc. This provides you the liberty of investing your money, in multiple commodities, without any burden.

Moreover, the contract duration may be as small as, an hour. So, you can initiate multiple investments and realize profits, in extremely short period of time.

Binary Options: Things To Understand

Simplistic rules to follow

In regards to binary options trading, you need to follow four simplistic steps for executing the trade.

  • You need to observe the Asset chart, the product that you are dealing, for determining if the present price would go down or up.
  • The next thing is to determine if you would like to make a “CALL’ trade, when you expect the present value of Asset to go downwards.
  • You, then need to press trade button, if you feel that the present option price is just appropriate for the strategy of moving down or up.
  • Lastly, you either can come back or take a break at the end of trading period, or simply sit and watch the screen with mixture of frustration and glee as the trade price moves down and up, when it approaches end of trading period.

Factors to understand

It is very important on your part to understand the appropriate stocks to trade and by doing so, you also need to know the company where you desire to make the investment, uses this amount. Having better understanding of the company’s products, its market and competitive weakness and strengths can help you to make an informed decision.

Binary Options: A New Investment Tool Exclusively For On-The-Go Investor

There are many choices for the investor available in the market to safely have their investments to get better returns. However, the one that is considered to be the best is binary options. As a matter of fact, binary options trading is said to have exploded into present investor’s fast paced life. It offers simplistic three click trade execution and its usage has spread across to the world of mobile smart phones like wildfire. You can trade anywhere and at any point of time and with the help of any type of mobile phone. One can find easily an app for it.

Taking caution

Like in any other investment, it is very important for you to take extreme caution while investing your hard earned money. Trading in stock, currency, commodities and the index markets along with binary options does involve risks. Hence, you need to trade with monies, which you can actually afford to lose. Retirement accounts, school savings account of the child, personal savings accounts, etc. should not be used for this purpose. Also, you should refrain from using money from the different credit card accounts, which you might find to be tough to pay. Similar to other trading market, you need to be prepared mentally and financially to lose the funds, which are set aside to trade. This is because, the different markets are volatile and highly fluctuating.

What is to be done?

Before going ahead with binary option trading, it is very important for you to first get adequate knowledge on the subject and understand what is to be done and what to avoid. There are hundreds of sites, forums and blogs that do discuss on this topic in length and also provide appropriate tips and suggestions. By following them, you can definitely minimize the risk and gain immensely.