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What are Binary Options?
Trading have become very popular amongst traders. Binary options allows the purchase of an asset where the buyer has the opportunity to gain a fixed payoff (almost double his investment) just by successfully predicting if the price will go up or down. The use of options trading will permit an investor to have the chance to gain a great amount of returns in a short period of time. Binary can be considered as an event with two possible outcomes: one being ‘yes’ the other being ‘no’ meaning the outcome was not as predicted.
The Meaning of Binary Options Trading
The actual word binary means involving two, therefore for binary trading refers to the two possibilities. If a trader invests a fixed amount on a option; if that option is successful the trader will receive back a fixed amount in profit, if the option is unsuccessful the trader will lose his invested amount, consequently making binary option investing a simple with direct process investment product.
Call and Put Options
A call option stands for the buy of the binary options at a predetermined price by a predetermined date (the expiry). The buyer of a call can buy asset at the specific price until expiry. If the buyer believes that the price of the asset is going to be higher than the price at the shutting time of maturity then the best choice is to place a call option.
On the other hand, if a call options means you can buy, then a put is the option to sell the asset at a predetermined strike price until a fixed expiry date. The put option buyer can sell assets at the strike price, and if he chooses to sell, the put writer has to buy at that specific price. If the buyer believes that the price will go lower, the obvious choice would be to place a “put” option.
A trader chooses to invest in crude oil stocks. He buys 150 shares and he has to forecast if the price will go higher or lower at the expiry date.
In addition to that he has the chance to pick the expiry time. At the moment, it would be logical to be watching the current strike price.
If the selling price, or the price at maturity costs $50 per option and the trader wishes to buy 20 options at $100 each, thinking the price is going to be over $50 when the option reaches maturity. In this case, the trader will receive the agreed upon percentage of return.
If the return is 82%, he will receive $182 per option x20 giving a total of $3,640 therefore the trader made $1,640 profit. If the price ends up above strike price the trader will lose his total initial investment.
How to start trading Binary Options
It would be advised to go online and search binary options brokers that are highly recommended by other traders as well as find reviews that are details and compare brokers between them in order to find the one that better meets your needs and fits the criteria of a good binary options broker.
A good recommendation would be Binary Options Trading Signals as it offers traders the following benefits:
35 years of operational history
Binary Accounts starting with only US$250 + Free demo accounts
Up to 50% bonus
FCA regulated broker
Complete product offering
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