Prior to 2008, binary option trading was not widely available to individual investors. The access to this form of trading would have involved the inclusion of a binary options broker who would have demanded up to $500 up front as a hire fee.
Binary Option Trading Introduction
This acted as a substantial barrier to entry to most individual investors and therefore the popularity of binary option trading was limited. However, the introduction of binary options listings, initially by the Options Clearing Corporation, followed by the American Stock Exchange (AMEX) and Chicago Boards Options Exchange (CBOE) introduced binary options trading to the general public. This move allowed the possibility of online trading of the options and its popularity has grown exponentially amongst both new and veteran traders. This binary option system are traded over the counter and include a wide range of underlying assets. Binary options markets are open during market hours with some markets, including currency-based binary options, being open 24 hours per day 5 days a week .
Trading Guide for Binary Option
Binary options offer short-term investments which can be traded by both beginners and professional traders. Binary options are also highly accessible in that beginners can learn to trade in a few minutes, and advanced strategies can be employed which may enhance the probability of making consistent profits. Beginners can learn how to trade using the trading guides offered on Opteck.com; these include trading tutorials, eBooks, market analysis tools and trading strategies. Using these tools can help the trader to gain an understanding of risk management and maximize the opportunities for a high return on each investment.
Binary Option Trading Benefits
Many binary options traders prefer the flexibility offered by binary options as opposed to traditional option contracts. They can be traded over shorter expiry timeframes, ranging from one hour to one month and are also very simple to understand. Due to the fact that binary options have a predetermined payout level, prior to executing the trade the investors knows the precise value of both profits and potential losses from the start. For this reason they are called Fixed Return Options (FRO’s) and the simplicity of calculating this as a percentage of the investment stake also makes them highly attractive to investors. With the potential to gain 75-95% profit on each investment with no commissions, they have become a very popular trading vehicle.
Binary options are not exposed to the volatility of price action that occurs in many markets. Therefore, the beginning of the day – when markets have a tendency to gap and price fluctuates wildly – will threaten the stop losses of many traders whose profit and loss is reflected by the value of the asset. Binary options, on the other hand, do not exhibit these fluctuations in value, as they are only concerned with the expiration of the option as either ‘in the money’ or ‘out of the money’. The actual degree to which this is either side of the strike price is irrelevant and both profits and losses are known outcomes from the start. Touch options, however, allow traders to take advantage of this volatility and operate in a similar way to traditional binary options in that a trader determines a price that will be touched prior to the options expiry. If an investor anticipates significant volatility, they can pinpoint a price touch target and still maintain predetermined payouts and losses guarantees. The potential for large percentage profits and the speed at which they can be achieved make binary options trading very popular alternatives to traditional market investments.
Binary Option Strategies
Binary options are different from traditional options contracts in several ways. They offer a more flexible and accessible way for investors to purchase options without having a fixed price. Investors of binary options can therefore determine the amount that they wish to commit to purchasing the option. Binary options also allow investors to predetermine their level of profit and loss prior to purchasing the option. This predetermined payout level is a percentage of the initial investment used to purchase the option. Similarly, the potential losses are predetermined and will result in a loss of the initial investment less the protection rate which is often around 15%. Therefore, When a binary option expires ‘out of the money’ the client can maintain around 15% of the investment position credited back to their account once the trade expires. The expiration time on binary options can also be much shorter than traditional options, allowing an investor to purchase an option which may expire in a shorter time period such as 5 minutes, or up to one month in the future. Binary options expire at intervals during the course of the day and this makes them particularly attractive for short term traders.
Binary Option Trading Software
Binary options are trading instruments which provide derived investment in underlying assets. The option contract is derived from the value of the underlying asset and therefore no ownership of the asset exists. Binary contracts have an expiry time and date when the contract will either be considered as ‘in the money’ or ‘out of the money’. This reflects whether the call or put option expires above or below the strike price. To which extent the binary option can be considered as ‘in’ or ‘out of the money’ is irrelevant to the predetermined level of profit and loss. An example of this is an investor who believes that, over the course of the day and after an inflated rise, the value of gold will fall to around 1588. The investor logs into her account with a view to executing a put option of $100 at 9:00 with an expiry time of 14:00. The payout level for this option is 120% with a current strike price of 1590. The investor executes the trade and at 14:00 the option expires with the price of gold at 1589 giving a successful payout of $120 on her $100 investment.
Binary options offer a fast, exciting and accessible way to trade financial markets. Although they are very simple to understand and their execution is also straightforward, Investors should stick to markets that they are familiar with in order to maximize their chances of making high returns in a short time frame. After choosing the underlying asset you wish to open the trade on, the next step would be to choose the time frame for the expiry. Then the next step would be to choose the direction of the option. If you are confident that the price will rise during this period, purchase a call/high option. If you believe that prices will fall, purchase a put/low option.
Binary Option Broker
If you’re looking for a highly rewarding trading platform which will allow you to diversify your trading then binary option trading system is an excellent choice. Surf to 24Option to learn more about binary option trading.