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Newbies Investment Portfolio: Cursory Look on Binary Options Trading

Updated on May 9, 2015
Binary options is a finsncial tool that is used tolessen the degree of risk in trading.
Binary options is a finsncial tool that is used tolessen the degree of risk in trading. | Source

Overview

Binary Option is oftentimes classed as an exotic option, which trades in price fluctuations in various markets. Binary Options offer various financial instruments - commodities, forex, indices, and stocks to its clients with different payout rates, degree of risks, fees, liquidity factors, and investment strategy.

This instrument has a fixed expiry date which is the strike price. The trader wins by wagering on the correct direction of the market vis-a-vis the strike price. He is paid a fixed amount regardless of how the price has moved, if he is right.

On the other hand, if he wagers incorrectly - he losses all his investments. If the trader feels that the price will be higher, he purchases a "call" option. If he thinks that it will go lower, then he purchases a "put."

60 Second Strategy on Binary Options

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Binary Option Trading Mechanisms

Online binary options offer controlled risks, where expected earnings and losses are known prior to trading. Binary options are usually part of a trader’s hedging strategy, where positions have been opened on forex, stocks, indices, and commodities. This strategy serves as an insurance or a hedge, in case the trade falls flat of expectations.

Binary Trading Options

Trading of binary options is relatively simple and there are many options to choose from: Up-Down, One-Touch, Sixty Seconds, and a binary option that is designed with the use of an Option Builder.

In using the Up-Down binary option, the trader decides on which way he will go – will it be up or below the current strike price? If he thinks the price will expire above the strike price, then he chooses Up; if he thinks that it will go the other way, then he chooses down.

Binary option trading is easy: pick the asset, put up the funds, and choose the direction it will go --- whether higher or lower than the strike price. If proven right, you earn (in-the-money); if wrong, nothing (out-of-the-money).

A number of binary options brokers give a payout of around ten percent (10%) if you lose in the trade, so there is still money even if things did not fall through. On the other hand, if the expiration price and the strike price are the same on D-day, the trader gets back his initial investment --- only.

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Binary Options FAQs

  • Considered as an exotic financial instrument that pays a fixed amount upon expiration;
  • It is a trading tool that allows you to get high returns within a short period of time;
  • The risk is limited to the amount you committed in a specific trade as compared to forex trading, where you risk the entire amount in your trading account;
  • The minimum amount per trade is $25; the maximum amount is $2,000;
  • The first deposit can be $200 depending on the option trading platform used.

If you want to customize your trade and strategies, you should get an Option Builder tool. This tool allows you to indicate the specific asset and money that you plan to put in, the expiration time, and your desired risk/reward ratio.

On the other hand, if you want to trade fast, do the sixty second binary options trading. Trading time is only one minute with a minimum investment of $5 and the maximum, of $500.

If you want to trade beyond normal trading hours, then opt for One Touch trading. This is done by opening your position at a weekend until the last day of the next trading week.

Once the strike price is hit on or before the expiry date, you get a payout that may range from 500% to 600% of what you initially invested. This type of trading is preferred by expert traders who are confident that the strike price will be hit in the next few days.

Binary Options Demo Account


Most binary option traders offer a practice account for clients to use for free trades, without the risk of losing their money. The only requisite is for traders to open a deposit of $500, the amount of which --- is dependent upon trader policies.

Clients do not use this deposit to trade, but only signifies goodwill of his intent to do actual trading later on. When the amount is deposited, there is need to inform the account manager to activate the practice set.

A $50,000 account will be available for the newbie to practice on, so as to gain more experience and confidence to do binary trading --- before doing it in real time.

Understanding Binary Options

Options Review: Pros

  • The presence of experienced traders who are respected in the field as mentors;
  • Clear and easy trading platform , with pools of assets to choose from;
  • Offers a high return rate of investments for off hours currency pair trading of up to 85%;
  • 100% matching bonus for deposits of up to $3,000, depending on trading company.

Binary Options Review: Cons

  • Most of the firms have inadequate customer support: live chat or click call button;
  • Unclear instructions regarding payouts and deposits on a number of binary trading firms
  • Oftentimes there is lack of customer service from the owners of these firms.


Update on the Financial Market as of September 30, 2014

U.S. stocks experienced a decline recently, brought about by tensions in Hong Kong and Syria. The U.S. markets have mixed signals of increases in personal spending (0.5 percent) and a decline in home sales (1 percent). Both the S&P 500 and Dow Jones experienced twin losses of 0.25 percent each.

The Asian Markets are lower across the region, with the Hang Seng experiencing a stiff decline of 1.28 percent, its biggest lost since 2012. This was attributed to the protest movement in Hong Kong that's beginning to affect the financial markets and the future of China's economic growth.

The European market have a mixed outcome --- with negative inflation rate, and a lower consumer price index of 0.7 percent, down by the projected 0.9 percent. There may be need for the European Central Bank to step in and inject more money into the economy to stave off massive swings in the financial markets..

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