Binary Options is a simplified way of trading assets. Similar to Stock Market or Forex market, it is a structured trading where the payout amount is fixed if the option expires in-the-money or get nothing if the option expires out-of-the-money.
The concept behind Binary Options is the Toss Coin Game, where you predict the outcome of the coin: whether its heads or tails. Like this game, the investor predicts the trend price of the asset if it increases or decreases. This is expressed in the Call Option or Put Option. If you predict the asset’s price will rise, you select Call. On the other hand, if you predict if the asset’s price will go down, the Put is selected.
Unlike other traditional trading strategies, Binary Options allow traders to select a trading expiry. In this case, the trader has complete control on its expiry – he can choose for the trade to expire at the end of the hour or for a week. Usually, trading in Binary Options lasts only for an hour or a day.
The pay-out percentage on any Binary Option Strategy may vary from time to time. But unlike traditional trading where your losses may be higher, this strategy provides you with two possible outcomes: the expires in-the-money or expires out-of-the-money. For instance, if you select Call, you receive in-the-money, and for Put, its out-of-the-money. Your losses may even be slim depending on what you predicted.
Investors have several assets to choose from: stocks, commodities, currency pairs and indices. Once a trader starts using Binary Options, he should stick to a price between $50 and $5000 as a general rule. But what sets this strategy apart from other trading strategies is that investor can trade multiple times using the same asset.
Each trading options have its perks and drawbacks and the decision lies only to the trader on which type of option is he willing to use to gain profit. But first, we need to get a closer look on commodities option.
A Commodity Option allows an investor to buy or sell a commodity on a fixed rate (strike price) and a set of expiry before or in the future. The investor purchases a premium to the seller or to a broker to get this option. What’s interesting is that the investor can gain a profit, whether if it’s the outcome is bearish or bullish. If he thinks the price of the commodity will drop, he may select a Put option, but if the price of the commodity increases, the Call option is also available.
Although Binary Options and Commodities Options have more or less the same type of trading scheme, but what sets them apart is the length of the trade. The downside of Commodities Option is that this cannot be used for a shorter term while Binary Options is capable of doing trades for a shorter period – from an hour up to the end of the day. Investors are usually wary when their trading takes them weeks or months to close. In Commodities Options, need calculate their future margin and there’s a possibility that the stocks may end up decreasing in the coming months. For Binary Options, it only takes a shorter period to determine the outcome of the trending price.
There are concerns raised by some traders if Binary Option is illegal in the USA. It may be legalized in the United Kingdom, so its residents may not be alarmed when trading using a Binary Option strategy; however, it’s a different story for USA residents.
Majority of the States in America disallow Binary Options and say it’s illegal. According to US governments, some trading and gambling websites commit a fraud as they trick and bribe banks to money laundering and bank fraud. Because Binary Options is vulnerable to these risks, some brokers felt safe to disallow US residents to trade. One of these Binary Options Brokers that disallow US traders to enter is the BetOnMarket.
For brief introduction, this is a platform originally found in Cyprus. Novice traders will be glad to know that this broker provides a demo account and offers more functions that is lacking in other brokers. Traders may take advantage of the trading room platform because it provides quicker settlements and provides new developments on a trade.
What’s so special about BetOnMarket is that it offers a 75% payout and another 25% bonus on your first deposit. In the case that you are in out-of-the-money, you receive 10% refund from your initial investment. Traders are allowed to trade for indices, index futures, currencies, stocks, and commodities.
Despite the risks, there are still US residents that continue to trade using Binary Options Brokers. But to make sure that they are allowed, they use this broker platform that accepts USA traders. It is called the AnyOption.
One of the Binary Options Brokers, it is a digital web-based application where the output of the trade is pre-determined with a fixed payout in the beginning of the contract. This platform is relatively easy for novice traders because they can trade as ong they have access to the platform through the Internet.
When you are using AnyOption, you need a minimum investment of $25, You get a highest return of 65%-71% when “in the money.” You are guaranteed a 15% return if “out of the money”. Also, a total of 15% of your energy production will remain despite a wrong trade.
To trade using Binary Options, you need to secure the following:
Binary Options works when a trader has a strike price, an expiry or maturity date, an asset to invest, and the underlying or security price. Binaries are purchased as a premium payment, like any other options. Traders may predict the stock price through a Call – if the price goes up; and Put – if the price goes down.
The payout option of Binary Options is fixed. If the outcome of the underlying instrument is “in the money,” a binary will pay a fixed amount. Binaries are purchased in over the counter markets from financial institutions, hedge funds, and large trading partners. The underlying instrument or asset may be a commodity, currency, index, or rate.
Since Binary Options trading has an expiry of an hour or until the end of the day, traders and investors should take precautions on when and at what hour they are trading. They should never trade hastily and must consider other factors such as weather, news, and current events. Tradings can be affected in a matter of minutes or an hour, so it’s highly suggested to utilize Binary Options for hedging weather events and other scenarios to assume a fixed rate in case a risk happens in the future.