October 22, 2017

How do Binary Options Work?

Trading in the binary options market is one of the ways you can trade and investment different assets. Binary options provide traders and investors a variety of benefits that can help them earn a hefty return.

How do binary options work?

Binary options provide traders with a fixed return when a payout occurs, but it can also yield nothing once the trading day comes to a close. There are two distinct types of binary options, the asset or nothing option or the cash or nothing option. The asset or nothing binary option yields a return that is equivalent to the value of the security or asset purchased, while a cash or nothing binary option yields a fixed amount of money once the option or asset purchased expires. Trading in the binary options market will lead to only two possible results, a payout (in cash or assets) or nothing. A binary option is also known as digital option, fixed return option, or all or nothing option.

Trading in binary options is quite simple. The potential return that a binary option yields is already determined before the trading begins or before a purchase is done. Binary options can be purchased in either direction of a trade by purchasing a put/down or call/up option. Binary options have a definite expiry time that can be as short as 60 seconds or at the end of a trading day. In a binary option trade market, if a trader thinks that the market will rise, the trader can make a ‘call’.

On the other hand, if the trader thinks that the market will sink, the trader can purchase a ‘put’. Traders in the binary options market rely on the proper prognosis of the market. If a trader makes the proper prognosis he or she will get a fixed return, and if the prognosis is incorrect, he or she will also lose a fixed amount or everything. For example, if you invest $90 on Microsoft stocks’ growth, if the stock gains one point, you will be guaranteed a payout of more than 85%. On the other hand, you will also lose more than 85% of your investment if the stock you purchased loses a point or more.

What are the benefits of trading in binary options markets?

There are quite a few benefits in investing in binary options. Here are some of the benefits you can get from investing in binary options:

  1. There is less risk when you invest in the binary options market. A trader investing in the binary options market will have prior knowledge about the potential yield and risk before starting the trading day. A trader can always adjust the amount of money invested if the return is too small or if the risks are too great.
  2. Binary options also provide high payouts, if a trader plays his or her cards correctly. If a trader makes the correct prognosis about the market, he or she can get a yield of more than 85% of the initial investment.
  3. A binary option can be traded daily or even hourly. The short time trading of binary options allows traders to choose the expiry time of the assets or options they purchase. A trader can choose at the end of the hour, end of the trading day, or end of the week.
  4. The low capital requirements of binary options allow traders to start at $25. The low investment capital allows even newbie stock traders to invest in the binary options market.
  5. Traders in the binary options market have access to multiple asset classes in various markets around the world. A trader can access these assets as long as a market is open anywhere in the world.