Binary Options Explained
Advanced Trading Technique Worth Knowing
The Binary Options trading platform is a little bit different that what some people are used to. You are not actually buying a product; instead, you are buying the option of the product. Sound a little bit confusing? Well, in actuality it's not that difficult to understand. It just sounds a lot more difficult, but the concept is actually fairly easy to explain and for the average person to understand.
Binary Options Trading
Binary Options trading is actually when the buyer of the product agrees to accept the contract to purchase a product at a determined (fixed) price and a certain time in the future. With binary options trading, the buyer knows the potential for profit or loss in the beginning before the purchase is even made. Binary options trading give the buyer of the asset two different outcomes on the contract purchase. Option 1 is where the buyer actually receives a profit off of the contract that was purchased, and Option 2 is where the contract runs out and the buyer receives nothing.
Things One Must Consider
Whenever a buyer is considering a trading platform like the binary options, they must know what they are doing and what they should be looking for, just like with any other form of trading. With binary options, there are three important considerations that the buyer must look at in order to make an informed decision about whether or not to purchase the contract.
- The underlying asset (product)
- The expiration time
- The direction the asset will move in
The Underlying Asset
The underlying asset can be a variety of several different things. The buyer could be considering trading in commodities, stocks, currencies, and several other different things. In any case, the asset is what the buyer will receive for the purchase.
The Expiration Time
This is a fairly simple concept to understand. The expiration time is the time when the contract will end. The end point for the option can vary. The buyer may be able to purchase binary options that have an expiration time of just an hour or the buyer may be able to purchase a binary option that has an expiration time of a couple of months.
The Direction the Asset Will Move In
Before explaining this concept, the buyer must know what a strike price is. The strike price is the fixed price that the buyer will purchase or sell at. With that being said, there are only two directions that the asset can move in. First, the asset can move up and when this happens it is called a call option. Second, the asset can move down and when this happens it is called a put option. In either case, it is up to the buyer to decide that by the time the expiration time occurs, will the asset move up or down. When the buyer makes his/her decision, they will then place either a put or call option, depending upon what direction they think the asset will move in.
Trading Binary Options
Nowadays, binary options trading are becoming increasingly popular. It is a fairly simple process, and this is why many traders are beginning to take note and use this form of trading. Basically, all one needs to know is an idea of what direction the asset may be going in. This is completely different than other forms of trading where the buyer must know not only the direction, but they must also have an idea of the price movement. With binary options, the buyer already knows what the fixed price is (strike price).
Another reason why buyers are leaning towards the binary options is because they know in the beginning what the risk is, unlike other forms of trading. This can help to make the stressful stock market and other markets fluctuations, less worrisome for the investor/buyer.
In the Money VS. Out of the Money
These are two terms that anyone who considers trading in binary options must know. When the trade is in-the-money, this means that the buyer will receive a payout on the option. When the trade is out-of-the-money, this means that the buyer will receive nothing. In some cases, if the buyer trades with certain companies, they may be able to receive a small percentage of their investment back if the trade expires out-of-the-money.
Once you understand the risks, you also know that there can be high rewards. Here is what some people are experiencing. They make easy money trading with a simple options trading platform. Up To 75% Return hourly. High Bonuses. www.eztrader.com Your experiences will vary. The possibiliy to earn great returns is there - but only if you know your market well.
EzTrader seems to be one of the best binary options program we have found. That said, they do give us a referral fee fo those who buy through our link.