Binary Options: Let’s Recall The Basics
Different names are used to denote binary options. Traders working on interest rate and foreign exchange markets dub them digital options. Fixed Return Options (FROs) or «All-or-Nothing» options – these are names used to denote them on the US Stock Exchange. In fact, they’re called binary due to the fact that they offer only two outcomes: something (let’s assume, it’s a profit of $100) or absolutely nothing. Usually, the following assets can be utilized for day binary options trading:
- Stock indexes,
- Goods (limited).
Despite there are a lot of types of binary options, daytraders mainly prefer the following two types:
- Cash or Nothing: this binary option will pay a predetermined amount on the condition the option earns a profit upon expiration.
- Asset or Nothing: the given binary option pays the value of the underlying security. As we told above, that’s the reason why these options are known as binary options – they offer only two probable results of such investments.
The very idea of trading binary options is very simple. It’s just the trader’s desire to open a trading position, and then close it within the same trading day.
Please take into account that all binary options contracts have a fixed expiration date on the condition the platform used by the trader supports an option expiration function.
It’s crucial for traders to pick a binary options broker as well as the expiration date of the contract that ceases trading within the same trading day. What’s more, as soon as the transaction becomes active from a specified date and prior to the expiration, the investor is unable to manually close his trading position as it can be done with other types of options.
When purchasing a binary option contract, before the completion of the deal the trader already knows his possible profit. Considering the fact that binary options can be implemented with nearly any financial instrument, and in any direction (PUT or CALL), a trading day with binary options can be striking profitable and easy. The trader can count on a high-yield outcome, which will be paid out without delay.
Apart from the high returns that binary options offer to investors, they also have other advantages:
- Investors are free to set the contract expiration time in compliance with different strategies (over 300 strategies, for instance).
- Investors are able to manage their accounts without brokers. The absence of any intermediaries results in lower costs.
- It’s possible to simultaneously trade various options.
- Traders are free to make small initial investments, thus enjoying an affordable trading day with limited risks. Just one successful trade can offset all of your previous losses.
- Investors have an opportunity to earn a profit the whole day long without unnecessary downtime.
- Some traders consider binary options trading to be a thrilling and interesting game.
- The potential win when trading binary options is very high, while and the turn of the trend can be strikingly fast.
- With the constant expansion in the binary options market, there’s always a new opportunity for the trader to derive new benefits.
- Binary options trading is very secure because of the personal involvement in trading in this market.
- With transparency of risks as well as short terms on the day of trading binary options, the chaotic and unpredictable nature of market volatility isn’t a problem any longer.
- Quick-witted day investors follow trends and certainly logic in the market. Sticking with their principles, they can count on increased gains without the necessity to adjust their strategies. Nevertheless, if the trend doesn’t work because of the short trading time, it’s always possible to quickly exit the market, and any losses can be drastically diminished.