What are the binary options?

What are the binary options? While they appear relatively new, they have been traded for over a decade, although they were originally traded over the counter, typically between two institutional investors, mostly hedge funds and investment banking support desks. Retail traders had to wait until 2008 before they were granted the right to trade binary options and since then the popularity of this asset class has skyrocketed.

What are binary options and how do they work? We’ll see:

It can best be summed up as a trade that offers only two distinct outcomes, whether your trade ends in the money (a winner) or out of the money (loss). This is in stark contrast to traditional vanilla options where concepts such as time decay (theta), volatility, strike price, time to expiration, and the like all enter into the price.

They are a simple risk-reward proposition, which is clearly known and established before entering the trade. Many of the trading sites place a percentage return of between 60% and 90% for winning trades and a 0% to 15% equity return for losing trades. Binary options signals are generally offered on a variety of underlying assets. in most operations. platforms

Shares (also known as shares) are offered on most platforms, but the number of shares is usually limited. Stocks are typically only offered in the biggest and most liquid names, such as Apple, Google, Microsoft, Intel, JP Morgan, and the like. Technology stocks make up the majority of equity-based binary options. The foreign exchange (Forex) market is also well represented across all platforms with most major currency pairs making up the bulk of transactions. Popular commodities like gold, silver, oil, natural gas, and copper and major indices from around the world can also be found on most of their trading platforms.

One of the most important things to be careful about is choosing your broker. A good platform can help you read and understand the market. You just have to follow the trend. If you use good analysis and strategy, you can make a lot of profit. One more important thing, never go against the trend.

There are few terms that are used in their trading.

call option – This is the type of option that traders buy when they think the price of the asset will be higher than the strike price at the time the option expires.

put option – just the opposite of a call option. Binary options traders buy it when they expect the price of the underlying asset to be below the strike price at expiration.

fundamental analysis – a basic financial analysis method that takes into account global indicators (also known as macroeconomic factors) such as unemployment, GDP, interest rates, etc. It also examines factors that are specific to the particular company, such as management, underlying value, and others.

Technical analysis – this is a method that predicts future asset price movements relative to historical market data. Technical analysis uses various charts that can have different chart patterns like triangles, gaps, double tops and bottoms, etc.

in the money it is used when your trade is successful at the time of expiration.

Out of the money it means that the trader has failed to correctly predict the price movement of the asset and the trade is unsuccessful.

in the money It is used on the rare occasions when the asset’s price at expiration is equal to the initial price.

Index – this is a portfolio of stocks that represent a market or a part of a market. Each index has its own calculation methodology and traders can usually read a brief description of all tradable indices in the Asset Index presented on each broker’s website.

Pay is the profit that is credited to the binary options trading account if the option has expired In-the-Money. The maximum payout for High/Low binary options is in the range of 65% – 85% for most brokers, while the maximum payout for One Touch options can go as high as 500%.

option builder – a special binary options trading tool that allows investors to create a binary option, based on their own preferences. When you use Option Builder, you choose an asset, an expiration time, and a win/loss ratio that depends on the risk you’re willing to take.

Buy me – an exclusive binary options trading feature that allows you to close the position before the expiration time. It is used to minimize losses in cases where the market is not favorable.

A common misconception in this regard revolves around expiration. Most people believe that it has an expiration time of one hour; This is simply not true. In recent years, we have seen an expiration range from 15 minutes on the low end to one month. While I don’t know many people who trade one month binary options. I’m sure some have found a use for them. One of the main advantages is the short time frame and simplified payment structure, which is why you will likely see traders gravitate more towards one hour trading.

Now you know what binary options are