Simple Tips for Successful Binary Options Trading
The binary option derives its name from the result that this type of trading offers. There are only two possible outcomes of this trade ‘in the money’ or ‘out of the money’. A successful trade gives the trader a cash payout and in a case of a failed trade, he gets nothing and loses his investment.
» Binary options isn’t like Forex
In binary options, no assets are purchased or bought but you estimate the direction of the price of a certain security for a certain time period in future. The buyer gets his payout only after the expiration time of the option.
According to your estimation, if the option crosses the strike price before the expiration time, you become liable to receive the payout and if the price of the option remains low than its strike price before the expiration time, you get nothing at all. Binary options are also known as digital options, all or nothing options, and fixed-return options.
Read also: Profitable Binary Trading: Five Golden Rules
» Call / Put Quotations
Initially, binary options were traded over the counter. The traders used to buy these contracts from the issuer and no brokers were involved. These contracts were known as exotic instruments and the traders don’t have any liquid market to back them for this type of trading after its issuance or before its expiration.
In the year 2007, Options Clearing Corporation proposed to change this rule for binary options trading. American Stock Exchange launched exchanged traded nothing or cash binary options in May 2008. Chicago Board Options Exchange (CBOE) followed the rule just after one month. The new quotations give a sigh of relief to the traders and they could now trade easily and continuously.
» You must consider these factors
Those, who trade binary options, should consider some factors before they trade. The key factor is the estimation in which direction the price of security is expected to move and they should look for an economic event that can affect the option’s movement.
Before selecting an asset, it becomes important to know the depth of the company the asset belongs to, company’s strengths, its partners, investments, profitability, and projects. The accurate analysis will help you plan the strategies ahead of the trading thus leading to more profit and minimizing the loss.
Traders should speculate and analyze the news about the assets they want to trade released by the markets from time to time. In order to make their trade more successful, they can take the help of newsletters and the Internet for more information about the trading.
» Why are Binary Options So Popular?
The main feature that has popularized the binary options internationally is enormous profit that this trade offers in a very short duration. This easy to understand the concept of trading give a chance to all those who do not want to invest their fortune but would like to start with a small amount.
Binary options do not require you to read hordes of books or join any course to understand the trading. The knowledge of only basics is quite enough to start the binary options trading. As the investment is small, so is the risk and it is known to the trader before he starts trading.