Binary options are a type of fixed returns investment. This is because traders are faced with only two outcomes in this regard–either profit or loss. Trading with binary options is a kind of contract. It gives a buyer the right to purchase an underlying asset at an already fixed rate in a specific time zone. The security that is being traded is normally termed as underlying asset. This security can include gold, silver, lead and even oil, currencies or stocks. The price at which the asset is bought is called as the strike price.
A binary options trading is significantly different from traditional type of training. In an ordinary training, you actually own the asset. And are eligible to be in its possession for the amount of time desired by trader. On the other hand, in binary options trading, you are trading on the variances of the prices of the asset.
Let’s take a look at it with an example for better understanding. When you do option trade in a company say “FORD”, you don’t actually become the owner of the shares of this company. You actually just make a contract. Under this contact, if the price of this company’s shares goes up or down at the end of the options expiry period. Your assumptions’ correctness will decide the loss or profit in the trade. This means the accuracy of your prediction to the result of the shares or the price movement will allow decide your profit or losses.
As a trader, when you deal with binary options, you will buy the underlying asset. And you will have to choose the call option. This is based on the trends expected by you for the rise in value of the security at the end of expiry time. This expiry time may be the end of the day, month or week. After placing a call option, it is affirmed that the buyer is expecting the price of the asset to rise at the end of fixed time more than it was at the current time. When the situation is reversed, the binary options trader can place a put option. This indicates that the trader assumes the price to fall at the time of expiry.
Binary options trading are gaining popularity day by day. It has become a common tool utilised by traders of today’s world. Apart from the flexibility it provides, the technical tools like Brokers or Binary Options Robots further elevates the chances of success in this arena. Mostly traders now adopt binary options to increase their profits and earn from these trades.
The amount, whether to be paid or gathered depends upon whether the contract ends in the positive direction or on a profitable note. This is also called as “in the money” or “out of the money” in binary terms. If the contract ends with out of the money question, the trader does not get anything in return.
As one can see, binary option is one of the most flexible means of trade available in the market. There is very less to lose and one can make lots of money in binary options. The only drawback is the unknown thing for trader i.e. the asset trend. Then again, if luck is on your side, nothing can stop you from earning piles of money from Binary Options Trading. With proper planning, research, intellectual thinking and right state of mind, one can make his mark in the industry and earn lots of money within a short period of time.