Truth about the Binary Options - What are Binary Options?
Binary option trading has emerged to be quite a profitable venture. This is why most traders are keen to grab the chance to trade binary options. Now, there are two possibilities that are likely to happen if you trade binary options. Either you get a fixed amount of compensation if the option expires in the money. However, if the option expires out of the money, then you get nothing in this situation. It will not be wrong to say that the outcome or the success of binary options depend on the yes or no proposition.
The History of Binary options
The binary options emerged on the forefront way back in 2008. The Chicago Board of Exchange termed the binary options as a tradable asset in 2008. At that time the mortgage crisis was at its peak in the US. This affected the global financial system.
At that point most of the investors were keen to go for an option that had a lower risk profile. This is why the binary options trading seemed to be a more lucrative option for the average trader at that time.
The Options Clearing Committee also brought about changes in the regulatory framework of the binary options so that they can be traded on the major exchanges with ease.
In 2008 the SEC accepted the recommendation of the Options Clearing Committee and now, the binary option can be traded as a standalone asset on the major exchanges.
How Binary options work
It will not be wrong to say that binary option trading can be termed as a prediction that can either be right or wrong. What the traders do is that they predict that a certain asset will be above or below a certain point once a fixed amount of time has passed.
If the prediction turns out right the trader gets the profit. However, the problematic part is that if the prediction is not right, then the trader loses all his money. Two common terms are used in binary option trading. They are termed as call or put. The trader decides to place a call option when he believes that the price of the asset will increase by the time the option expires. If the trader feels that the price of the asset will decrease by the time the option expires, he places a put option.
Let us understand the concept of binary option trading with a practical example. Suppose that the trader decides to trade a currency pair EUR/USD at the strike price of about 1.38. The trader assumes that the price of the asset will be above 1.38 at the time of expiry and this is why he decides to place a call option. If the initial investment was about $100 with a promised profit of about 80%, then the trader will get a profit amount of about $180 if the option expires in the money. If the initial investment was about $100 with a promised profit of about 80%, then the trader will get a profit amount of about $180 if the option expires in the money. It is also vital to discuss the expiry time here. When you decide to trade binary options, then you can select different expiry times. You can go for the short-term expiry, medium expiry or long-term expiry when you trade binary options.
The short-term expiry means that the trade will only last for a few minutes. If you decide to go for the medium term expiry, then the trade can last for a few minutes to a few hours. If we talk about the long-term expiry, then the long-term expiry can even last for about 24 hours to a few weeks or months.If you have decided to trade binary options, then you need to have a clear idea about the assets available. You can choose from currencies, indices, stock and commodities when you have to trade binary options.
How much can you earn or lose with binary option trading
You can earn a decent amount of money if you end up choosing the appropriate trading platform. For example, you can even earn more than 80% profit if you decide to choose a reputed trading platform.You can earn a decent amount of money if you end up choosing the appropriate trading platform. For example, you can even earn more than 80% profit if you decide to choose a reputed trading platform.If you are a new trader, then it will not be a smart idea to indulge in live trading.The smart approach is that you should start off by using the demo account. It is termed as the practice account in binary option trading.
The benefit of this practice account is that you get a chance to try out your binary option trading strategy without worrying about any losses. Another benefit of the demo account is that you get a fair chance to explore the look and feel of the trading platform you use.
The good news is that all the reputed brokers offer the demo account so signing up for a demo account should be your first step towards binary option trading.The good news is that all the reputed brokers offer the demo account so signing up for a demo account should be your first step towards binary option trading.Remember trading binary options is a safe choice provided you monitor the market trends and place your investments wisely.
