Thursday, June 7, 2012

Binary Options 101

Online Investment Guide: Learn More About Investments in Binary Options
Beginners always look for term “101” in order to order to understand the basic information about any industry. This binary options 101 is a beginner’s guide into the binary options industry providing newcomers into this field with basic information on a “best efforts” basis to help them quickly grasp the intricacies involved in this industry and set them on an exciting path to superb profits.

What Are Binary Options?
Binary options are also called digital options and simply refer to a type of investment that can have only two outcomes for the investor: being in the money or out of the money. It is a financial derivative which means its value does not represent the price of an actual asset. Instead the binary options are “derived” from the price of an underlying security. In the financial markets, these securities will include stock, forex, commodities and indices. As an investor in this industry, you will therefore be presented with the option of placing your bets on stock options, forex options, commodity options and index options. It is one of the simplest modes of investments. All an investor has to do is predict the price direction of any of these underlying securities within a certain time frame. If they get it right, then the investors are said to be in the money and will get very handsome payouts. If they get it wrong, then an investor is out of the money and will be refunded a tiny payout. It is analogous to the digital world where signals can either have predetermined “1” or “0” values hence the names “digital options”. While many beginners may equate this to gambling, it is smart gambling as you have the opportunity of evaluating the performance of the security before buying your option. These options will expire at a predetermined time upon which you can exercise your discretion to cash in.

One of the things that you will need to do as an investor is choosing the appropriate binary options market to trade in. Depending on the types of options that you choose, there are several markets that you can now invest in. The markets offer the options of stock, indices, commodities and currencies. Investors in stock and currency have the option of investing in London’s FTSE, Germany’s DAX and the NYSE. If you are planning to invest in index options, then you have markets such as FTSE 100, CAC 40, DAX 30, Dow Jones, NASDAQ and S&P500 to invest in. Commodity options are available for commodities such as gold, silver, crude oil, wheat, heating oil, sugar, soybeans, coffee, cotton, natural gas or gasoline. As an investor, you may choose any of these options in particular global markets in London, New York, Sidney, Tokyo or Berlin.

Types of Binary Options
There are many types of binary options that you could invest in. This binary options 101 will show you the clear choices that you have to make when trading in options. Investing in this field will present you with four types of options: one touch, no touch, double one touch and double no touch. There however exist some other modes of classifications. The one touch option involves the trader placing a “trigger” by defining the rate at which they will get a payout if the underlying asset price touches their trigger or defined price. Under this option, the trader is clearly aware that they will make a profit or a loss based on the trend of the pricing of the underlying asset. In the no touch option, the trader defines a target and they will get paid if the price of the underlying asset does not touch the target price. In the double one touch option, traders will define two triggers in the pricing of the underlying asset and make profits if any of these predefined triggers are touched by the price movement of the underlying security. The fourth type of binary options is called double no touch option and simply represents the opposite o the double one touch option. The trader will define two options and make money if neither of those options is touched by the pricing movement of the underlying asset.

Advantages of Binary Options
 Binary options trading has many advantages including lower threshold for entry, higher payout rates, simplified trading process and the opportunity to trade in global markets. Besides, traders can easily carry out their trading with the click of a mouse. With as little as $30, investors can easily begin trading in the futures. The threshold typically varies from one platform to another and it is important to evaluate what each offers. Some platforms have a threshold of $100 while others have much lower thresholds. The payout rates are quite high and will vary from 60% to 500% in some platforms when you are in the money. This makes it one of the most lucrative forms of investments available in the financial markets. Besides, when you are out of the money, certain platforms will offer you a refund payout that varies from 10-20% ensuring that you have a soft landing on your unlucky days. Binary options also give you the opportunity to become a global player and invest in multiple global markets across multiple time zones. In the age of the internet, binary options provide the best ways to invest in the global markets from the comfort of your laptop!

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