What are Binary Options?

In Binary options trading, the payoff is a fixed amount or nothing.  The option can either expire in money or in no money.

If your prediction is correct, you receive the agreed payout. If not, you lose your initial stake.

It’s called ‘binary’ because there are only two outcomes – win or lose.

How does binary Options trading work

In binary options there are only 2 possibilities.

You either predict that the asset price will rise or fall.

In other wards, to trade binary options you don’t have to own an asset. You place trades basing on prediction.

The strike price, the expiry, payout and the risk are all disclosed at the trade outset.

The strike price is the current price of the underlying financial product.

  All you do is to predict whether the future price at expiry will be higher or lower than the strike price/current price.

If you think that price will rise above the strike price, then you buy. Conversely, if you think that price will fall below the strike price, you sell.

When you predict right, you get a full percentage reward attached to the risk.

However, when wrong, you lose the amount you risked.

In addition, Binary options are held until expiry in an all or nothing payouts. So you either win it all or lose it.

The good thing about it is that you are always aware of how much you are likely to lose or gain before placing a trade.

This  usually ranges from 50% -85% of the amount you risk which makes management and trading decisions much easier.

Unlike other options, the premium and the expiration time is chosen by the trader.

Never the less, it does not give the right to the holder to purchase or sell the underlying asset.  The expiration time frame is also a bit shorter ranging from minutes to a few months.

Why should you trade options

Simplicity

Trading in binary options is very simple and easy to do.

Binary options trader does not need worry about leverage, spreads, stop-loss strategies, deposit margins or hidden transaction fees.

All you need is to make the right prediction whether the asset will go up or down and make profits.

In addition, the trades have expiry time, so whether wrong or right it ends in that period.

Higher payouts

Binary options offers high returns. The returns are high and come in fast. 

Trades expire in a shortest time possible and with high returns. The returns can be as high as 90% if all goes well on your side.

So imagine when you take 15 trades all expiring after 5 minutes and gets you a return of 80%-90%. It is possible when trading binary options.

Minimum financial risks

The risk involved is minimal and limited.

Surely, you know how much you will win or lose based on the amount you are trading. This allows you to limit the amount of risk you expose yourself to.

In this case, you always have greater control of your risk from the start.

Flexibility

Binary options market allows traders to trade financial instruments spread across the currency and commodity markets as well as indices and bonds.

It’s flexibility gives alt of exposure to trade a security of your choice.

You can trade currencies, stocks, bonds, indices, cryptocurrencies,  commodities to mention but a few.

Last but not least, you can also start trading with low investments.

With binary, you don’t need a very large capital investment to start trading. You can start risking small and grow your capital slowly.