What are Binary Options

What are Binary OptionsBinary Options are investment vehicles that allow investors to trade on the price movements of underlying assets, with fixed, pre-determined returns. In other words, Binary Options are predictions on how a certain stock, index, or commodity will move over a period of time. With Binary options you are not buying the asset, you are just predicting whether the asset's price will rise or fall within a specific time frame.

Binary options are named as such because they only have two possible outcomes: either the forecast is correct or it is not. In other words trading binary options is an “all or nothing” game. If your prediction is correct at the time of expiry, you will receive a fixed payoff. If your prediction is incorrect then you will lose your initial investment.

As a trader, you decide how much you want to invest in the option as there is no fixed price for the option, just fixed return. Do you think the price of an asset will move up or down within the next minute, hour or week? By investing in your forecast, you can make up to 90% profit on your investment in a minute, hour or week respectively. The benefit of binary options is that the market has to have risen only slightly at the time of expiry for the trade to be a winner.

Binary options offer the highest payouts out of all types of financial instruments in trading. Oftentimes, you can make up to 90% profit on your investment, in minutes, even if the market moves by a small margin. Other times, you can stand to make over 1000% gain on long term trades. The industry is very competitive, the brokers themselves are well regulated and there are no conflicts of interests between the broker and the client. Binary Options Brokers make their money on the payout differentials, which is a type of commission, and they really want their clients to win.

Time is a component of the binary options, it affects their pricing, and it acts as a time decay part of the premium, which typically declines exponentially in the second half of the binary option's term. This is so because binary options are priced in such a way, so that their price reflects probability. That is the probability of an event happening. The time premium element doesn't reflect real world probability but rather the broker's and the market's perception about the probability of the event happening. Much in the same way, the premium of your car insurance reflects the risk that your car insurance company sees in you, as part of a larger collective market of insured drivers. But the premium itself cannot predict the future! A very good individual driver (who pays very low insurance premiums) might some day cause huge damages to the insurance company, while other drivers who are considered risky may never cause any damages. It's the same in the premiums of options, both in classic and binary options. And you as a trader can stand to make very large profits, if you buy when premiums are at lowest level, and sell when they rise to very high levels. In many types of binary option trades you can sell back your option (your inflated premium), before the trade even expires, giving you more flexibility in trading.

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What makes Binary Options so compelling?

Diversity: Binary options can be placed on virtually any financial product. Binary options are issued 24 hours a day, 7 days a week and allow investors to trade on a variety of time frames, from 60 seconds to 365 days.

Simplicity: With Binary Options traders don't have to go through the complex pricing and valuation process of traditional options. All you have to do is predict the market's movement right

Calculated Risks: Unlike traditional investment methods, with Binary Options, the potential risk and return are known before the investment is made. Binary options have pre-calculated risk levels, so that you can choose precisely how much to invest and for how long. And you also know how much you stand to make or lose; all before you invest. You are always in control of your exposure.

Time Management: With Binary Options the investment time frame is also known. Binary options traders don’t have to spend all their time and attention on keeping track of spreads, leverage, deposit margins, stop-loss strategies, hidden transaction fees and interest rate differentials, like other traders do. Binary options give traders back the power to focus solely on making correct predictions.

Ability to profit from flat/range markets: You can generate a profit from a binary options trade even if the price of the underlying asset changed by a single pip. Because of this, binary options can multiply the size of price action in a quiet market.

Hedging: Binary options can be a very effective tool to hedge any current positions in traditional markets without having to actually buy or sell the underlying asset.

Low minimum investment: Start trading with as little as $100.

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