Binary Options – what are they? Read the answer on our Trading Blog!

Binary Options – what are they?

Binary Options – what are they?

Binary Options – what are they? Binary Options Trading is the easiest and fast way to trade Stocks, Indexes, Forex, and Commodities online. You need to focus on just three elements: the asset, the time period, and the prediction. Basically, in binary options trading (also called digital options trading) you just need to predict whether the price level of an asset will increase or decrease in a given period of time.

This article will give a brief introduction to Binary Options Trading and how they are used today.

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If you predict that at the end of the specified time the price level of the asset you are trading will be higher than the current level, that you should place the CALL option. In reverse, if you think that the price level of the asset will be below the current level, you should select the PUT option.

If by the specified time your prediction was correct, this means that you are “in the money” and you will get up to 85% of your initial investment; if your prediction is incorrect, it means that you are “out of the money” and you will lose up to 100% of your investment. In some cases, the broker offers you special trade deals in which, even if you lose your investment, you will get back 5% to 15% of your initial investment. Binary Options – what are they?

How are binary options traded?

Here’s a bit of binary options trading explained. Remember, you need to focus on three things: the underlying asset, the prediction, and the time period.

The underlying asset – whether it is a commodity, index, share, or currency, you should concentrate on trading those assets you are most familiar with;

The time – for each option, at the moment you make the trade there is a time limit specified; when the time expires, if your prediction is correct, you win, if not, you lose; the time range can be from one hour to several days, according to the specific trade conditions;

The prediction – is based on whether you think that the price of a certain asset will go over or under the current level; if you predict right, you can make a nice profit of up to 85% of the amount you invested.

For instance:

Let’s say Gil is a trader and he follows very closely the EUR/USD currency pair and decided to trade binary options. He opens an account with a binary options broker. He opens the EUR/USD chart around, let’s say, 2 p.m.

On the chart, Gil sees a binary option with the underlying EUR/USD asset that will expire in approximately one hour. Michael wants to trade this option. Now he needs to figure out what he thinks to be the price trend. Up or down? Green or red?

If Gil decides to press the green button, which means he opts for CALL. By doing this he predicts that the price will rise over the current level in one hour. If he is right, he will win a payout of 85% from his initial investment.

If Gil decides that the price will go below the current level in one hour, he presses on the red button, which means he chooses PUT. At the end of the one-hour time, if the price will go under the current level, Michael will make an 85% profit from his investment.

Finally, Gil decided that the price of the EUR/USD pair will go higher than the current level and therefore he placed a 100 $ investment and he chose the CALL option. He waited until 3 p.m. and here’s what happened:

At 3 p.m. the price was higher than the current level from 2 p.m., of 1.35471. So Gil’s binary option expired “in the money” and he gained 85% profit. Had it been otherwise and Gil would have predicted that the price will go under the current level, he would have lost his investment (which means up to 100$ loss, depending on the Return Loss percentage of his broker, that could be between 0% and 15%). Binary Options – what are they?

Binary options have a lot of potential for traders who want to earn a profit without navigating the often-risky up and down world of forex and stock trading. Learning more about binary options could open up the doors to potential profits for a savvy investor, making them worth a shot.

Binary Options – what are they?