Your Guide To Binary Options Trading
Have you thought about trading options but are afraid to loss more than you invest? There is another choice that offers interesting investment possibilities called binary options trading. It has the advantage of being fast moving and limited amounts of loss. You can not lose more than your investment. Additionally, you can earn large profits.
As the name implies, a binary option has two outcomes. It is like a two way choice - to do or not to do; go along the 'up' or the 'down' side. In the trading market, binary stands for the up or the down movements of the currency, index or stocks. In these options the pay out is either all or nothing. For this reason binary option trading is much simpler to understand and perform than the normal option trading.
In binary option trading, an investor will take any available security to do his trade and then decide the amount he would invest in it. Once he has invested the money, the trader has to select the direction in which the security might move in the market. If the investor feels the prices will move up then he must buy the binary option contract to recover the total value of the contract. In case he predicts a fall in the prices, he must cell the contract to get full value. Only certain types of securities can be traded in binary contracts; only those with the highest volume can be traded using this strategy.
The amount of money one can earn from a binary option only relies on which direction the security moves. The actual amount the value changes does not make a difference. At the end of expiration, the pay out will be the same, even if the security shows a jump of ten dollars or 20 dollars. Let us understand the working of the binary options with an illustration. Say for example, if you invest hundred dollars in a security and make a binary option contract of fifty percent pay out value for an upward movement of security, then you will make hundred fifty dollars if the security shows a jump of even a cent at the expiration time. Similarly, if you had traded the binary option contract for a dip in the prices and the security would have actually shown a dip, then also you would have earned a profit equal to the pay out.
Binary options were first traded in Europe and became extremely popular. They are traded extensively in the key European exchanges like the EUREX. Due to its advantages and popularity in Europe, this type of trading has also moved to few parts of United States. Binary options are a low cost, quick way to participate in the stock market. They also have a high return potential. Binary option trades are done on an hourly bases and due to their simple up and down structure; they can be easily understood even by the beginners.
As the name implies, a binary option has two outcomes. It is like a two way choice - to do or not to do; go along the 'up' or the 'down' side. In the trading market, binary stands for the up or the down movements of the currency, index or stocks. In these options the pay out is either all or nothing. For this reason binary option trading is much simpler to understand and perform than the normal option trading.
In binary option trading, an investor will take any available security to do his trade and then decide the amount he would invest in it. Once he has invested the money, the trader has to select the direction in which the security might move in the market. If the investor feels the prices will move up then he must buy the binary option contract to recover the total value of the contract. In case he predicts a fall in the prices, he must cell the contract to get full value. Only certain types of securities can be traded in binary contracts; only those with the highest volume can be traded using this strategy.
The amount of money one can earn from a binary option only relies on which direction the security moves. The actual amount the value changes does not make a difference. At the end of expiration, the pay out will be the same, even if the security shows a jump of ten dollars or 20 dollars. Let us understand the working of the binary options with an illustration. Say for example, if you invest hundred dollars in a security and make a binary option contract of fifty percent pay out value for an upward movement of security, then you will make hundred fifty dollars if the security shows a jump of even a cent at the expiration time. Similarly, if you had traded the binary option contract for a dip in the prices and the security would have actually shown a dip, then also you would have earned a profit equal to the pay out.
Binary options were first traded in Europe and became extremely popular. They are traded extensively in the key European exchanges like the EUREX. Due to its advantages and popularity in Europe, this type of trading has also moved to few parts of United States. Binary options are a low cost, quick way to participate in the stock market. They also have a high return potential. Binary option trades are done on an hourly bases and due to their simple up and down structure; they can be easily understood even by the beginners.
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