Introduction to Binary Options Trading
Market enthusiasts around the world are referring to binary options as a revolutionary form of trading. Its cutting-edge qualities are breaking barriers for investors within each avenue of the financial arena.
Minimal risk, online accessibility, varying assets, and zero commission fees are just a few reasons why binary options trading is capturing the attention of both new and experienced traders alike.
This introduction will focus on understanding the basics of binary options and serve as an introduction to our guide which will provide an abundance of facts, strategies, and tips for all intrigued traders.
What are Binary Options?
Binary options, also referred to as digital options, are contracts to options where the pay-out of the underlying asset is fixed and exceeds the predetermined strike price within a given time frame without the obligation of purchasing the asset. The pay-out of the option is not dependent on the range by which the price of the underlying asset moves.
In layman’s terms, binary options allow a person to trade an underlying asset and not invest in the asset itself and the traded asset possesses a predetermined pay-out percentage.
In order to collect the pay-out percentage, or be “in the money”, the trader must predict whether or not the traded asset will rise or fall against the current price within a specific period of time. The price is the price of the underlying asset at the exact time of the trade. It does not matter how large or small your prediction is against the price, as long as it is correct, pay-out percentage is yours.
Three Simple Steps
One of the reasons trading binary options is growing so quickly in popularity is because of its simplicity. With little research of market status and a basic understanding of binary options, making a profitable trade is highly conceivable. Let’s take a look at the types of options and the steps needed to place a trade.
There are two choices for every trade: CALL and PUT. A call (up) option means that you think that the price of the chosen (of the) asset will rise above the current price within a specified period of time. A put (down) option means that the price of the chosen underlying asset will fall below the strike price within a specified period of time.
Binary options also have various expiry (closing) times which give you a choice. For example, you can choose the asset in which you decide to invest to expire in 15 minutes, 30 minutes, one hour, intraday, weekly, biweekly, or even monthly. Ranging ending times gives the investor a heightened sense of control in the role of returns and allows you to easily employee simple high profit trading strategies.
The information provided thus far is all you need to enter the market of binary options.
In just three simple steps and just a few minutes of your spare time, you are able to make major earnings. Let’s take a look at the steps:
- You determine which asset you wish to invest in.
- You decide if this asset is going to go UP or DOWN.
- You decide if this will happen now or later.
It is just that simple… There is only one last decision and that is how much you wish to invest. There are no hidden risk(s), no fees and no exposures; When you enter your trade and you know your profit, and risk.
So there you have it; the basics to trading binary options. When trading, it is always important to remember to keep up with the market. You don’t need to be a professional and spend hours in front of Bloomberg, or read each article in the Financial Times, but it is crucial to stay up to dates with world headlines. Being updated with market status will guide you in the appropriate directions in which you will minimize your risk and in which will earn you the most profits.
Binary options’ trading is one of the most simplified methods of trading that gives you flexibility and control. With fixed odds returns, structured reward and risk ratios, and variability of underlying assets, it is no wonder why this platform of trading is turning into a worldwide financial phenomenon.
Traders of Binary Options
Binary options are exotic options which are traded via private sectors. These short term investments offer high rates of return and are traded by both inexpert and experts alike. Binary options are straightforward and effortless; the trading concept is extremely easy to ascertain. Along with ease and simplicity is accessibility.
Binary options are available to trade 24 hours a day, 7 days a week making trading available to anyone wishing to start a new trading venture.
Binary option trading only recently became available to individual investors. In 2008, the Securities and Exchange Commission approved the listing of binary options with continuous quotations to individuals. Until 2008, binary option trading was only accessible via a broker or via a brokerage firm. A major barrier of entrance for those wishing to trade binary options was the cost associated with the third party.
Today, the option to use a broker or a brokerage firm is still available to individual investors but the need for the middle man has decreased immensely. Most individual investors involved with binary option trading use an online platform that does not charge a fee and is continuously accessible.
IvoryOption™ is the only online platform for trading binary options that provides exemplary customer service, continuous education, and unlimited transactions. Our account managers are experienced professionals that provide guided material, one-on-one coaching, and scheduled webinars.
The coalition of a user–friendly and flexible platform along with guided expertise allows our investors to maximize earnings with minimal effort from the comfort of their own home.
Advantages of Trading Binary Options
Binary options are one of the newest and most interesting vehicles found today in options trading. With their simplicity, potential for large gains, and high turn-over, they have many distinct advantages over other types of options trading. Although conventional trading still has strengths in many situations in many other cases binary options are simply the easier, more enjoyable form of options trading.
The simplicity found in binary trading is perhaps the aspect which makes it most appealing over traditional options trading. Since every situation is either gain or loss, based solely on the direction the asset takes, investors need to pay much less attention to the details in this sort of options trading. To finish in-the-money, all a trader really needs to know is which direction the asset will move before the time of expiration.
• Entering a trade
The ease of entering a trade is another benefit binary trading has over other forms of trading. Unlike traditional trading, binary option traders can set the price of the contract and can trade on assets that they might not be able to afford on the traditional market. This also makes it easier for traders to gauge and limit the amount of risk involved in the trade. Since traders are purchasing a contract for a set price, they know exactly how much they will gain or lose should the asset finish in-the-money or out-of-the-money. This built-in risk management gives binary option traders a peace of mind that other more traditional traders do not enjoy, and insures that binary option traders always know how much they can win and how much they can lose at all times.
Binary options are relatively unfettered by regulation, making them an easy-to-access, highly-dynamic form of options trading. You can buy a binary option at any time of day or night, seven days a week. You can also purchase them from your own home, as long as you have an internet connection, and can use any number of services to get through to them. Because of the low level of regulation, a much larger field of assets are offered through binary options than through traditional options trading. In the future this field is likely to expand even further, so that you can purchase contracts on assets far outside of the traditional trading realm.
• High Profits
Binary options have one of the highest rate of returns on the open market. Most forms of traditional stock options must mature over time in order to redeem possible earnings; binary options have an average rate of return ranging from 75% to 81%.
• Short Term Investment Options
For many, investing can be an extremely stressful undertaking. The thought of exhausting income for a long-term pay-out is too difficult to manage. Traditional options can take years to mature while binary options are relatively short-term with extreme flexibility. Trading binary options allows the investor to experience a sense of control. At IvoryOption™, the investor has the option to make a trade with expiry times ranging from fifteen minutes to one month. This flexibility permits the investor to yield acute earnings in a matter of minutes.
• Low Capital Investment
For investors that wish to begin trading at an undersized amount, IvoryOption™ offers clients minimal trades of (£5.00 USD or EUR). This feature allows traders to get familiar with the platform and also gain trading experience at minimal levels.
• Protection Against Volatility
Binary options provide an unequivocal advantage against volatile markets. Because binary options provide fixed rates of return and because trades are not actually capitalized in the underlying asset, volatile markets only provide opportunity rather than detriment.
• Just One Pip
Unlike traditional options and the profit dependence of the difference between strike price and sell price, binary options do not require any more than one pip to be “in the money”. With all of these advantages, it’s no wonder that binary trading is such a rapidly expanding type of options trading. From the newcomer to the well-seasoned investor, binary option trading offers something for everyone; high profits with minimal risk in a short period of time. To explain it simply the asset simply has to move in the direction you selected.
Binary options are once again an uncomplicated form of trading. In order to grasp the concept of binary options trading, three key notions must be comprehended:
1. The Underlying Asset
This is the first component to any trade; choosing an asset. At IvoryOption™, over 100 underlying assets are available to clients. The assets are drawn from stocks, indices, foreign exchange, and commodities. Many traders focus on one asset or one sector or a compilation of many sectors. IvoryOption™ gives the client flexibility and control with its vast array of options.
2. The Expiry
Once an underlying asset is chosen, the contract for the option must be executed. At IvoryOption™, once again, flexibility is offered to its clientele. Contracts are offered with expiry times ranging from fifteen minutes to thirty minutes to one hour to end of day to one week and to even one month. You, the client, can purchase a contract up to five minutes before expiration, allowing you to grab a hold of any trend.
3. The Prediction
Finally, the prediction of the underlying asset is made. Depending on market data and other information used in guiding your prediction, a call option or a put option is determined. If you think an underlying asset will rise above the strike price, or the price of the asset at which the contract is executed, then a call option is placed. If you think the asset will fall below the strike price, a put option is placed. If the prediction is correct, your earnings will range from 75% to 81%, which is approximately double the initial investment.