Binary Options in a Nutshell

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As you can determine from the name, binary options trading is conducted when the trader is provided with two basic options to choose from. Here, those options are termed “call” and “put. Here, the call is referred to as buying an asset and put as selling. 

 

Binary options can be traded on a series of assets, including stocks, indices, and even events, making it a diverse market to trade in. However, the most popularly traded asset remains the forex pair of USD-EUR.

How Are Binary Options Trades Conducted? 

For instance, you are trading with gold, and the proposition you are presented with states that you have to predict whether the price of gold will exceed $1580 by 2.30 p.m. If you believe that yes, the price of gold would exceed this amount by 2.30 pm, you would buy the binary option, whereas if you believe that the price would remain below $1580, you would sell the option. The price of a binary option generally remains between $0 and $100, and similar to all other markets, there is a bid and ask. 

 

Whenever a trader wins or loses a trade, their account immediately faces the consequences. Upon winning, their account is instantly boosted with the money they’ve made, or else the amount they’ve lost is deducted. 

 

For example, suppose that the above gold trade has an 80% return on investment, and you decide to bet $100 on the trade. If the price of gold does end up increasing by 2.30 pm, then you will now receive $80 in your account, whereas if the price does not reach $1580, then $100 would be deducted from your total balance.

 

Binary options trading revolves around providing two main financial options to its traders, from which they need to select the one they deem most predictable within a preset expiration time. Once your contract is complete, you either win all the money or lose it all, hence the phrase all-or-nothing.

 

The aforementioned options cover whether an underlying asset is above or below a certain price within a certain timeframe. This makes trading binary options a generic yes or no proposition. Traders here place their trades entirely based on the past price movement, and historical data of the asset, while keeping market trends and direction in mind. 

 

The simplicity and straightforwardness of this ended up attracting a good amount of traders, adding to its popularity. To further add to the attraction, binary options supporting platforms also offer one of the simplest procedures for cash withdrawal. You can utilize the most common withdrawal services, like Bitcoin, Visa Cards, local bank transfers, etc. To learn more about this, you can also check out the Expert Option withdrawal website.

In What Markets Can You Trade In Binary Options?

Following is a list of all the markets that allow you to explore binary options trading further:

 

• Forex 
• Stock Indices 
• Commodities 
• Events.

 

Each of these markets is available to trade with on a series of platforms, however, it is important for you to make sure that the site you opt for is legally operated and secure.

Significant Elements Of Binary Trading 

To make successful trades using binary options, it is important for you to keep the following in mind:

Strike Price 

The strike price is usually the initial price you enter a contract with. It is the factor that determines whether you will win or lose the trade. If, by the time your predetermined expiration time comes, the rate of the asset you are trading has crossed the strike price, then you have successfully won the trade; otherwise, you have lost the contract. For instance, keeping the above-mentioned trade in mind, the strike price for gold was $1580. For you to win the trade, gold had to reach this price.

Expiry Time 

The expiry time is usually the duration of time from when you enter the trade until it closes. The time range can vary drastically. It can be anywhere between 60 seconds and a month. However, many traders online prefer a small-time frame. Their ideal time frame varies from 60 seconds to 30 minutes.

Payout Offer 

The payout offer is the return on investment your broker is offering you over your trade. The percentage that your broker promises on both the win and the loss is normally considered the payout offer. For example, in the aforementioned example, the payout offer for this contract was 80% for a win and 0% for a loss.

 

The payout offer is mentioned before the trader decides to enter the contract so that the trader stays in the loop and is aware of all the possible outcomes. A few brokers also offer a return on investment on losses as well, which goes as high as 10%. However, this differs depending on both different brokers and traders.

 

You need to keep in mind that you have to keep yourself constantly updated with the upcoming market trends and expected price directions of the assets you trade or intend to trade in the near future. You can also make use of technical indicators for this purpose.

 

Analyzing the most recent historical data of the underlying asset also helps a great deal and should never be underestimated. It can help you determine your next move with the utmost efficiency.

Conclusion 

Binary options is an all-or-nothing style of trading, as when you win a trade you win all, or else you lose all. This trading medium requires you to place your predictions upon the price movement in a predetermined time frame. To make the most efficient trades, it is however important for you to keep the basic elements of the strike price, expiry time, and payout offers in mind.