Binary options offer a unique way of profiting from the financial markets. They are relatively new, having only been made available to the retail trader from 2008. However since this time their popularity has grown and now many individuals are regularly using binary trading to make regular profits from the markets.
Binaries are a form of digital option. However unlike the complex products used in the futures and options world of the big banks, they have been simplified and repackaged for use by retail traders. In their new form they are simple to understand and offer a straight forward way in which almost anyone with a passing interest in trading can attempt to earn a high return from their trading.
How Binary Options Work
Binary options essentially offer a fixed contract. This is used to speculate on the price movement of a financial asset. The contract is set to run over a set time period. This can be a number of hours, day or weeks. When the end of the agreed contract is reached this is known as the 'expiry'.
Binaries get there name due to the fact that there can only be one of two possible outcomes when the contract expires: a profit or a loss. Therefore you will either win the stated amount agreed with your broker if the contract obligations are met at expiry. Alternatively you will forfeit the price you paid for the option contract at the outset.
The Call or Put Option
This is the typical option type that is offered by binary brokers. It pays out at expiry if the market has finished either higher than (Call) or lower than (Put) you entry price. This depends as to which way you call the assets price movement.
These higher or lower options contracts as they are sometimes referred to are set to run for a specified time period. Brokers will most commonly offer the opportunity for hourly expiries. You will however find some that will allow you to purchase contracts at fifteen minute intervals, half hourly intervals or even end of day expiries.
Payouts On Contracts
The key attraction of binary options trading is that it offers high payouts if your forecast for an assets price movement proves correct. With most brokers you can receive over a 60% return at the end of the contract if the prior conditions are met. In many case you can make even higher profits.
This payout is made irrespective of how far the price has moved. You receive the same fixed payout for big market moves and small market moves, provided of course that the conditions of the contract have been met.
Trading Risks
As with all forms of financial speculation there are risks involved. Binary Options are no different in this respect. However unlike many forms of financial trading, with binary options your risks are limited to the initial price you pay for the option. For example you may purchase an options contract on the expectation that an asset is going to move higher. If the price level has dropped by the expiry time you will suffer the loss of the money you paid to buy the option. This is your only liability no matter how far the market falls.
Markets To Trade
There are a great many markets that you can trade with binaries, including most of the major global stock indices, Forex pairs, commodities and major global shares.
Being able to trade on this wide range of assets from just one account offers a lot of potential for strategies to be developed. It also means that you should never be stuck for opportunities to trade on your account.
Binary options offer an easy to understand method of trading. They can offer the potential for high profits to be made while a unique attraction is that they also offer fixed risk. For this reason they are not only suited to seasoned traders but provide an excellent introduction to the world of financial trading for new traders.
Binaries are a form of digital option. However unlike the complex products used in the futures and options world of the big banks, they have been simplified and repackaged for use by retail traders. In their new form they are simple to understand and offer a straight forward way in which almost anyone with a passing interest in trading can attempt to earn a high return from their trading.
How Binary Options Work
Binary options essentially offer a fixed contract. This is used to speculate on the price movement of a financial asset. The contract is set to run over a set time period. This can be a number of hours, day or weeks. When the end of the agreed contract is reached this is known as the 'expiry'.
Binaries get there name due to the fact that there can only be one of two possible outcomes when the contract expires: a profit or a loss. Therefore you will either win the stated amount agreed with your broker if the contract obligations are met at expiry. Alternatively you will forfeit the price you paid for the option contract at the outset.
The Call or Put Option
This is the typical option type that is offered by binary brokers. It pays out at expiry if the market has finished either higher than (Call) or lower than (Put) you entry price. This depends as to which way you call the assets price movement.
These higher or lower options contracts as they are sometimes referred to are set to run for a specified time period. Brokers will most commonly offer the opportunity for hourly expiries. You will however find some that will allow you to purchase contracts at fifteen minute intervals, half hourly intervals or even end of day expiries.
Payouts On Contracts
The key attraction of binary options trading is that it offers high payouts if your forecast for an assets price movement proves correct. With most brokers you can receive over a 60% return at the end of the contract if the prior conditions are met. In many case you can make even higher profits.
This payout is made irrespective of how far the price has moved. You receive the same fixed payout for big market moves and small market moves, provided of course that the conditions of the contract have been met.
Trading Risks
As with all forms of financial speculation there are risks involved. Binary Options are no different in this respect. However unlike many forms of financial trading, with binary options your risks are limited to the initial price you pay for the option. For example you may purchase an options contract on the expectation that an asset is going to move higher. If the price level has dropped by the expiry time you will suffer the loss of the money you paid to buy the option. This is your only liability no matter how far the market falls.
Markets To Trade
There are a great many markets that you can trade with binaries, including most of the major global stock indices, Forex pairs, commodities and major global shares.
Being able to trade on this wide range of assets from just one account offers a lot of potential for strategies to be developed. It also means that you should never be stuck for opportunities to trade on your account.
Binary options offer an easy to understand method of trading. They can offer the potential for high profits to be made while a unique attraction is that they also offer fixed risk. For this reason they are not only suited to seasoned traders but provide an excellent introduction to the world of financial trading for new traders.
