Explanation of Binary Options
The term Binary Options (BO) is a type of trading design from the United States. Currently trading with BO designs has been quite popular in Europe and almost all over the world. But since 2008 the regulatory body of The Securities and Exchange Commission (SEC) has only given permission to a number of BO brokers in the United States alone.
What are binary options?
The term Binary Options should not worry investors because this type of investment is actually quite simple. Before I enter and speculate with BO, I have to know that there are only 2 possibilities every time I make a trade. I have the opportunity to make a profit as much as I have set before, or I will get nothing.
Investing in a number of funds that I have set beforehand does not mean I buy these assets. Yes, both stocks, commodities, forex or stock price indices. When determining the amount of funds that I will risk, I must also determine whether I want to enter in the “Call” or “Put” option. If the price of the asset is above the target price, the option call will expire, or in other words it has been expired “in the money”. This means that the price of the asset will increase after the time I invest and the expiration time. The time span can be one hour, one day or one week ahead since I invest.
In contrast to the option call, an option Put will be expired “in the money” if the asset price is below the target price. This means that the price of the asset falls between the time I invest and the expiration time. The term expired “in the money” means I will be paid, or I get a profit. The return that I will get usually ranges from 65% to 81%, and this I must know before I invest. In the opposite case, investors will get nothing if the asset price turns out to be “out of the money”.
Choose the expiration time
BO investors can decide on the expiration time starting from one hour, one day, a week and even a month, according to his wishes. The way I approach and analyze the market and the trading strategy that I use determines the choice of expiry time. If I am a trader with a short-term strategy such as 5 minutes or 15 minutes then I will tend to choose an expiration time limit of 1 hour.
But if I am a mid-term or long-term trader, I will be inclined to choose a 1 day (daily) expiration date. With a trading analysis combination, I can open a Call position if I expect the price to rise, or the Put position if my forecast price will go down.
Choose a broker that provides Binary Options facilities
Not all brokers provide trading facilities by means of BO. Some brokers with this facility also have different rules of the game. Trading with this BO design can be used on a stock market called stock binary options, or the forex market (forex binary options) and other types of markets. The future of trading in the BO method is indeed uncertain. If the trend of the number of interested people continues to rise, there will still be more brokers providing BO trading facilities.