What is a Binary Option?

BINARY OPTIONS - EASY. EFFICIENT. LUCRATIVE

Whether you refer to them as fixed return options (FROs), all or nothing, digital or binary options they have been in existence since mid-2008 and really are quite simple for any trader to grasp.

Basically, a Binary Option is a forecast on which way the value of a commodity, stock, index or foreign currency will head by a nominated time frame.

You never buy or own the asset relating to the binary option, you are merely envisaging the path that asset will take.

The price of the asset is irrelevant and as the name suggests, there are only two possible results that can occur.

The one important factor is if your prediction was right or wrong.

Via the TraderWorld platform, you:

1. Select the asset you would like to trade

2. Click on “Call” if you predict the asset rate will increase by the expiry time, or “Put” if you think the value will decrease.

3. Wait for the result

4. Claim your takings

Binary Options in Financial Markets

Amongst financial markets Binary options are quite often identified as digital options.

While digital options are indeed straightforward to comprehend and are easily traded, their pricing system is quite complex. It’s for this reason that Binary options are also known as exotic options.

Within all financial market assets, Digital options are usually traded over the counter (OTC) however more frequently utilised amongst the Forex and Interest markets.

Several stock exchanges of late have created listed digital options on certain stock, these are normally known as fixed return options (FRO’s)

Currently the CBOE delivers fixed return possibilities on S&P500 and VIX, also listed in 2008 were 20 stocks on the AMEX.

Binary Options’ Trading Advantages

Controlled Risk – With a binary option the amount you can lose is controlled. The percentage reward is stated from the beginning as is the loss.

Simplicity – All you require is a sense of direction or an ability to forecast i.e. ‘Will facebook stocks increase/decrease by this given date?’

Attractiveness - For a beneficial trade to occur all that is needed is for the value to close in-the-money and the successful trade will collect the total payoff, even if it was only correct by a single digit.

Hedging opportunities – This is a smarter selection for a trader who has an open stance elsewhere in stocks or currency.

Working with a binary option can reduce the risk of an additional loss somewhere else.

Punctuality – Trading on multiple time frames is an exciting possibility here as binary contracts are being allotted at all hours.

Fresh prospects present themselves frequently for traders in this arena because with Binary options there is always a termination time frame.

If you would like to begin trading Binary Options today, click here to create an Account