What are Binary Options?
Binary Options are one of the newest financial trading product to be made available to both new and experienced traders. Binary Options are a form of an option that provides a fixed deadline for expiration with a fixed payout. Binary Options trading only has two outcomes for traders to predict and then choose between. They offer investors a way to trade predictions on the value of a financial asset over a set period of time. Depending on whether the trader is correct or not will determine the profit or loss of the trade.
All Binary Options trades are limited risk, meaning traders know how much they are risking in advance, while fixed returns based on a percentage of the initial investment are also known in advance for a successful trade.
For example, if you predict the value of gold will increase today, and you are proven correct, you get a fixed payout. If the value of gold drops however, you lose the entire amount of the investment. It does not matter if gold exceeds the original price, the strike price, by $1, $50, $100 or $200, the payout for you is the same.
A more detailed example is, if you predict the value of EUR/USD will increase over the next 1 hour. EUR/USD is currently trading at 1.35777 and you invest $100 on the trade. Since you predict EUR/USD will increase you select the CALL button. If after 1 hour EUR/USD is trading above 1.35777 as you correctly predicted your trade will be automatically closed by your Binary Options broker for a return, in this example the return is 81% so your return on a $100 investment is $81 ($100 x 81% = $81). You have received an 81% return for predicting that the value of EUR/USD will be higher in 1 hour. If the trade had have gone against you, you would have lost your $100 investment.
You can trade Binary Options over hundreds of financial assets from around the world, not just gold or EUR/USD, all from the one account. These assets include currencies (forex), indices, commodities, stocks and exotics like Bitcoin.
Currencies: Trade EUR/USD, USD/JPY, GBP/USD, AUD/USD and a huge range of other currencies with returns of up to 91% for a successful investment.
Indices: Trade all the leading global indices such as Dow Jones, S&P500, FTSE, DAX, NIKKEI, Malaysia KL Index, Straits Times, Bombay 30, Australia 200, Hang Seng plus many, many more.
Commodities: Trade gold, silver, oil, platinum, corn, sugar, coffee and more with your Binary Options provider.
Stocks: Trade stocks from across the globe such as Google, Apple, Facebook, Twitter, Vodafone, BP, CITI, Nike, Petrobras, Tata Motors, BMW, BHP Billiton plus dozens and dozens more.
Exotics: Binary Options brokers often offer new innovative assets to trade such as Bitcoin.
Types of Binary Options Instruments
Hi/Lo: Are the most popular and simplest Binary Option traded, it lets traders choose whether the market price will close above or below the current market price. In a Call/High/Buy option (predicting uptrend) – the price must stand above the striking price at the time of the trade’s expiry time. In a Put/Low/Sell option (predicting downtrend) – the price must stand below the striking price at the time of the trade’s expiry time.
One Touch: Allows traders to decide if the market price will reach a certain value at any time before or at the expiry time. One Touch are ideal for traders who believe that the price of an underlying asset will reach the predefined level in the future, but are unsure about the sustainability of this price.
Range/Boundary: Have both an upper and a lower option target price which eventually forms a boundary range. In a Call/High/Buy option (predicting uptrend in a limited range) the price needs to remain higher than the striking price and lower than the upper line at the expiry of the option’s time frame. In a Put/Low/Sell option (predicting downtrend in a limited range) the price needs to remain lower than the striking price and higher than the lower line at the expiry of the options time frame.
Pairs: Gives traders the opportunity to pit two assets against each other and forecast how they will perform. Pair options allow you to trade on the relative performance of two commodities such as Gold vs Silver, or two stocks like Apple vs Google, or even two indices like the Dow Jones and the FTSE. This opens up a lot more trading possibilities for the well-informed Binary Options trader.
Every Binary Options investment a trader makes will have an expiration time, this is the date and time in which the Binary Option will expire and the trade will settle for either a profit or a loss. Binary Options brokers will have expiries that range from 60 seconds, 5 minutes, 15 minutes, 30 minutes, 60 minutes, 2 hours, 4 hours, 6 hours, 8 hours, 12 hours, weekly, monthly to as far out as 1 year. With the expiration times so flexible you can obviously make a trade in as little as 60 seconds.
This is something traders would struggle to do with many other type of financial trading product. As you can see Binary Options are flexible and allows all traders to select something that might suit their own trading style.
Binary Options are a way to trade the complicated world of the financial markets. Get your journey started today by opening up an account!
Your capital is at risk.