Difference between revisions of "User:Binary Options Trading"

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Binary Options Trading

A binary option is a fixed return option because there are only 2 possible outcomes which are fully realized at the onset of the contract

A binary option is a contract which gives the buyer (known as the owner) the right, but not the obligation, to buy or sell an underlying asset at a fixed price within a specified time frame.

The items being traded are known as underlying assets and they could be a range of products: currencies (e.g. USD/JPY), commodities (e.g. Oil, Gold), stocks (e.g. Microsoft, Coca Cola) or indices (e.g. Nasdaq, FTSE 100). The fixed price at which the owner buys or sells at, is known as the strike price.

When trading binary options, the buyer of the option chooses whether he thinks the underlying asset will hit the strike price by the selected expiry time – this could be at the end of the nearest hour or the end of the day, week or month.

The owner places a call option on his binary option trade if he thinks that at the expiry time the option will be higher than the current price. He places a put option if he thinks that at the expiry time the option will be lower than the current price.

In this respect binary option trading is extremely flexible. The asset, expiry time and predicted asset direction can be controlled by the owner of the investment who can select each one as he desires. The only unknown factor is if the asset will expire higher or lower that its existing price.

The returns from binary option trades are set from the onset of the contract. If an option expires in-the-money then a buyer will receive between 65-71% profit on the investment amount. If an option expires out-of-the-money then with anyoption™, the buyer will receive a 15% payback on his initial investment. The certainty of binary option trading makes it a preferred method of trading for many investors since not only is the potential gain known from the offset, but more importantly the potential loss is fixed and they will not be called upon for cover an investment which ended out-of-the-money.

This is how trading binary options would work: Investor A invests $100 on a call option on Oil, with a 70% return rate, with an end of the day expiry time. The current rate of Oil is 65.9001. If at the end of the day the price of oil closes at 65.9002 or above, then Investor A will receive $170. If it closes at 65.9000 or below, then he will receive a $15 payback. The simplicity of binary option trading makes it an attractive and desired way of investing for many investors.

The difference with trading binary options to traditional trading is that in binary option trading, a buyer is just trading on the performance of an asset – they will not actually own the asset itself. For example, in a stock option trade in Microsoft, an investor is not literally buying Microsoft shares, but rather opening a contract on whether the shares of Microsoft will increase or decrease within a specified time period.

Due their uniqueness, binary options have several advantages.

They are easier to trade because only a sense of which direction the asset will move in is needed

There is a controlled risk which is known from the onset of the contract - the 2 possible outcomes are pre-determined and set by the buyer depending on how much he invests in the option

For a binary option trade to be profitable, the option must only move in the predicted direction – the magnitude of the move is not relevant hence it is easier to receive a payout

Binary option trading is extremely flexible, due to multiple expiry dates and times, the range of underlying assets on offer and the ability to trade online without the need for a broker

So, whether you are a investor new to the world of trading options or a old-time trader used to the traditional trading market, it is recommended to try your hand at the phenomenon that is binary option trading and see how it could work for you.

How to Get Started With Binary Options and Binary Options Trading

A binary option is a contract which gives the buyer the right, but not the obligation, to buy or sell an underlying asset at a fixed price within a specified time frame. It is a fixed return option because there are only 2 possible outcomes which are fully realized at the onset of the contract.

Binary option trading is when a buyer enters into a contract to purchase an underlying asset at a fixed price at a pre-determined time in the future. The owner does not buy the asset itself, rather the option to buy it.

The fixed price at which the owner buys or sells at, is known as the strike price. In binary option trading, the potential gain or loss is known at the onset of the contract and it is determined by the amount invested by the owner. So, there are only two possible outcomes: or the option expires in-the-money and the owner receives a 65-71% payout; or the option expires out-of-the-money and the owner receives nothing. However, if binary option trading is carried out with anyoption™, an owner receives a 15% payback if his option expires out-of-the-money.

There are 3 aspects to the trade: the underlying asset, the expiry time and the direction the asset will move in. The underlying asset is the item which is being traded. This could be a range of products: currencies (e.g. USD/GBP), commodities (e.g. Oil, Gold), stocks (e.g. Microsoft, Coca Cola) or indices (e.g. Nasdaq, FTSE 100). The expiry time is the pre-determined time which defines the option’s end. The option can end at the end of the hour, day, week or month. The direction the asset will move can either be up (known as a call option) or down (known as a put option).

A buyer purchases a call option, if he thinks that by the expiry time, the asset will be above the strike price. He places a put option if he believes that by the expiry time, the asset’s price will be below its strike price. This makes binary option trading very flexible. The buyer can control the asset, expiry time and predicted asset direction. Due to the fixed return nature of options, the buyer also knows the potential gain or loss from the trade – he must only wait so see the direction the asset will move in.

A buyer can trade binary options on an online trading platform such as anyoption™ which is a new binary option trading platform available for private and institutional investors worldwide.

It is 100% web based, and does not require software download or any other previous trading experience. The interface is self explanatory and easy to use, the range of assets that options are offered on is incomparable and the speed and accuracy of settlements is flawless. The most advanced and stable technologies are used to ensure the safety and satisfaction of traders.

This means that anyone can start trading immediately. Just open an account with anyoption™, deposit money and follow the simple process: Select the currency pair which will be traded on e.g. USD/EUR, GBP/JPY.

Choose the investment amount for the selected binary option. This can be anything from $50 to $3,000 (or equivalent), though multiple trades can take place simultaneously. Decide if the asset is likely to increase or decrease. If increase then select a call option, if decrease then select a put option. Choose an expiry time – end of the hour, day, week or month

All a buyer must do is then wait for the expiry level of the chosen binary option to be finalized and displayed in the trading box. If the option expires in the money then the buyer makes between 65%-71% profit. If the option expires out-of-the-money then he receives a 15% payback of the initial investment.

There are several reasons why trading in binary options is rising in popularity: the risk involved is totally controlled and known by the option buyer.

Should the option expire out-of-the-money, he will only lose 85% of his investment amount, there must only be an incremental change in asset price for the buyer to profit - a move of only a 4th decimal point can render the option in-the-money and yield profits for the buyer, a buyer does not need in-depth knowledge of the market in which he’s trading – he requires a sense of direction of an asset, since magnitude of the asset movement is not important, binary option trading is extremely flexible, with a buyer able to select the asset, expiry time and price direction to suit his needs