Since binary options trading was made available for retailers back in 2008 with public listing on the exchanges, this relatively new system of trading has become one of the most popular financial ventures. Trading platforms for binary options are plenty, but not all of them are available for the retail level trader. The Global Binary Options Research firm has been tracking the binary options market and industry since its inception in 2008. Below they share a few tips with us regarding dipping a toe into some binary options trading, with a reliable broker.
Binary options are an interesting and challenging type of investment where the investor bets on the direction they believe an asset will move, as opposed to purchasing the asset itself. When an investor gets into binary options trading they trade on an "all-or-nothing" platform, which is where the trades get the name FROs.
Here is a closer illustration of binary options trading:
An investor may choose to purchase a Microsoft binary option for $100, speculating that at the end of the day the stock will have gone up from its current price. If the investor is right and the price goes up, he may get a 71% return.
Let us say the investor is right and Microsoft stocks do go up; he will get a $171 payout. However, if the stock goes lower, then his refund would be only $15. This means that binary options have a predetermined contract and when the investor speculates on an option there are only two possible outcomes.
If the value is larger and the buyer makes a bigger investment the same two outcomes are possible, except with more cash at stake. With binary options trading investors are able to make instant profits and have more options when choosing investments, as opposed to regular options where the buyer pays per point.
With regular options, investors make profits or losses based on the differences in points, of the strike price and the expiry price. Having these two outcomes clearly outlined from the start is what makes binary options trading so unique.
Because of the nature of binary options, buyers need to consider their assets carefully, because they have to hold on to their positions until they expire - an option can not easily be sold midway. A number of brokers make that option available but it should not be a common trick - holding out until the end is how most investors make money.
Since they came out a few years ago, options have gained significant interest for traders who want a more novel trading experience with a straightforward outcome.
In order to make the right decisions when buying options, investors have to plan ahead and understand the factors that affect each option. In order to get more information on binary options trading, Binary Options Trading School has made it possible for everyone to learn about options and improve their skills before putting up real money.
Top brokers offer investors from 65-89% or more profitability on standard options, and several markets including Forex, Stocks, Indices and Commodities. Understanding how each of the markets play out will help you make a more informed purchase so you do not lose money on volatile a market.