What Are Binary Options?
Binary options are simple fixed reward contracts.. A trader receives either a fixed profit or fixed loss. Binary options offer the traders a simple “One or the other choice”. They are designed to be very simple to trade.
Binary options have two possible outcomes, e.g “Up or Down”. The fact that there are only two outcomes possible is why they are called “Binary Options”.
Binary Options trading is extremely hot right now due to how easy it is for anyone to do it. Binaries are the future of online trading.
Binary Options Offer A “One Or The Other” Choice
The most simple binary trade is an up or down binary option.
Do you think the price of something (gold for example) is going to be higher or lower in 1 hour? If you think higher you “call” and if you think lower you “put”. You either win your trade and get your return (up to 90% in some trades) or lose the amount risked up front. One hour later your Binary Options trade reaches the expiration time. At this time you are either in the money or out of the money.
It is that simple – Binary Options Trading is designed to be easy to trade for everyone!
Example – Trading Google Stock With an Up / Down Binary
Let’s look at an example of a simple cash-or-nothing binary trade so you can understand how they work. Let’s say you want to trade Googles stock price.
You believe that Googles stock is going up, and that it will be trading at or above $670.39 as of a 4:00pm EST today.
You decide to make a trade based on that belief. Since you think the price is going up, you place a ‘Call’ binary trade. You risk a $200 on this trade. This the total amount of money you are risking. You can not lose more than $200. The best part about binary options is that your risk and return are fixed and known up front. You can never lose more money than your trade amount. Your return is known up front so you know exactly how much money you will make if you win.
In this example, your payoff is an 70% return if we finish in the money. There is a 10% return, or rebate, if we lose. We are going to risk $200. 70% of $200 = $140.
If we win, our payout is $340.
We get our $200 back plus $140 more for a total payout of $360. Most binary brokers usually offer between 70-90% payouts, at least the good binary trading sites trusted by traders today offer these kind of returns.
If we lose, our payout is $20.
We get a 10% rebate on our risked amount. 10% of $200 = $20 ‘out of the money return
So, to recap. If you win Binary Options you get your fixed return of $340. IF you lose Binary Options you lose your initial trade amount of $200, but get a 10% rebate of $20. Making it a net loss of $180.
The price you are betting Googles stock will close above, $670.39, is called the ‘Strike Price’. The date and time you chose as part of your trade are called the expiration date or maturity date.
If the price finishes above $670.39 you win the trade. If it finishes below $670.39 you lose the trade. In the money or out of the money.
Binary Options. That is it. It is that simple.
It does not matter how much Google closed above $670.39 It just matters that it closed above that price. Your payout is the same regardless of how far an underlying assets price moves.
This example is called a cash or nothing Binary Options, or an ‘up or down option. They are the most common type of binary option trade available. There are more types of binary options trades available. They all offer fixed return and a one or the other choice the trader has to make. Let’s take a look.
What Are Some Other Benefits Of Binary Options Trading?
Another benefit of binary options is their transparency. There is no hidden machine behind the workings of binary options. Your investment amount is known before purchase, your expiry time is predetermined, and all the activity up until your payout can be monitored and tracked using special tools provided by Binary-Method.net
What are binary options brokers?
When it comes to binary options trading sites, looking at the essence behind the binary options brokers in general is a must. You need to know what a thing is, before finding its best alternative, don’t you? In few words, binary options brokers are ordinary brokerages, which, though, either provide only features for binary options trading, or different ways for trading – including with binaries. Though, on the other side, it is well-known that when it comes to binary options trading sites they are usually entirely oriented to binaries without mentioning Forex market at all. Be aware that binary options brokers are also brokerage firms that are in most cases operated and owned by large financial services providers or companies. This fact makes them more reliable and according to the practice of these days a trader is willing to join binary options brokers that are properties of such big companies. We strongly recommend you follow this practice in order to provide your trading experience high level of security and safety.
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