Binary Options are an all-or-nothing system that allows you to predict the future price of a stock: the trader sets up all possible fluctuations on the asset’s value. With Binary Options you can trade stocks, commodities, currency pairs and much more. Try Binary Options today and begin now your career as a trader!
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When it comes to the field of the trading market, there are certain terms that you may want to know about before considering the option of investing your savings, and one of those terms is precisely what it has to do with online Binary options. With this in mind, today we’ve decided to go through some of the basic facts about online Binary options, so you can know everything you need to know about this interesting and fascinating world within the market.
What are online Binary options?
When it comes to online Binary options we’re referring to the process that allows the trader to make a bet as to the future price of a stock. The only difference is that they have a payoff of $100 per contract always. It doesn’t matter if the stock price is a penny over the “strike price” or if it’s over $100, the payoff from the online Binary options is always the same: $100.
The name comes because Binary means “2” and the binary options have only 2 payoffs: all ($100) or nothing at all. This kind of trading has been very popular in Europe for a few years now; that’s why you will see that this kind of trading is not available on some stocks or indices in the US these days.
What can I trade with?
You could trade with indices (Nasdaq, Dow Jones, Nikkei and much more), Forex (use the combination of your choice), commodities (gold, oil, coffee or corn) and stocks (Google, Coca-Cola, Deutsche Bank, among many others).
Online Binary options can be known with other names: on Forex they’re known as “digital options”, on the American Stock Exchange, they’re called “fixed-return options” (FROs) or all-or-nothing options.
The most used binary options by traders are these two:
-The asset-or-nothing binary option: This pays the value of underlying security. This is the reason behind the name “binary options”, because there are only two potential results when purchasing this kind of investment.
-The cash-or-nothing binary option: This pays a predetermined amount of cash is the option is in-the-money on expiry.
The point of trading with these options is simple: open a trade position and then close it the same trading day. Not all the binary options have expiry times, which means that the standards options have a fixed expiry date, unless the platform that the trader is currently using, offers something else.
The potential return of the binary options is calculated and known by the day trader before the purchase is made. And, the fact that binary options can be exercised on a big variety of financial products and in either direction (call or put), day trading use BO can be quite easy and profitable.
Let’s see the types of Binary options used
-The Touch option
The trader simply has to predict the level a price/value of the underlying asset will reach (touch) or not reach (no Touch). This level can be higher of lower than the current price of the particular asset.
-The Boundary option
Similar to the Touch option, but with this method two levels are defined: upper and lower. It can also be known as Tunnel option or Range option. The trader only needs that the asset stays in the boundary defined to receive a payout.
You place a Call, if you believe the prices will end up above the entry price after the expiration of the period and a Put, is when you believe that the prices will finish below the entry price.