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What are Binary Options?

What are binary options?

Binary trading allows users to enjoy all the action and potential profit of the market without any of the risk of actually owning the underlying asset. Assets can be currencies, stocks, indices, or commodities. One of the biggest benefits of binary trading is the fact that your payoff is known in advance, so you always know exactly how much you stand to earn or lose at the expiry.

This is certainly one of the most user-friendly ways to get in the online trading game, however, as with so many other endeavors, the key to succeeding here is education. Staying informed on market events and developments, along with acquiring asset evaluation tools, is the best way to ensure you get the most out of your investment.

How It works

The process is quite simple, traders speculate on the direction the asset's price will move- up (Call) or down (Put). Even if the asset only moved one cent in your direction at expiry, you win!

If you predicted correctly, you are "In the Money" and receive the predetermined payout.

If you predicted incorrectly, you are "Out of the Money" and do not receive a payout.

With binary trading, you never stand to lose more than you invested.

 

Useful Terms

Asset – The financial instrument on which the trade was made. An asset can be a stock, commodity, currency, or index.

At The Money – When a trade expires at the strike price you are At The Money. This means you neither profit nor lose.

Call– Choosing "Call" on your binary option means that you think the price of the asset will be higher at the time of expiry than at the time of execution.

Commodities – These are basic goods that are mined, such as gold, oil, and so forth.

Currency Pair – This is matching the value of two currencies (such as USD and GBP). When you set your trade, you are determining whether the base (first) currency's value will rise or fall within the pair's relation.

Expiry Time or Expiration – When the option trade ends. The asset's price at this point compared to the price at placing decides if you win or lose your trade.  

Call– Choosing "Call" on your binary option means that you think the price of the asset will be higher at the time of expiry than at the time of execution.

Commodities – These are basic goods that are mined, such as gold, oil, and so forth.

Currency Pair – This is matching the value of two currencies (such as USD and GBP). When you set your trade, you are determining whether the base (first) currency's value will rise or fall within the pair's relation.

Expiry Time or Expiration – When the option trade ends. The asset's price at this point compared to the price at placing decides if you win or lose your trade.  

Out Of The Money – When a trade expires in the opposite direction than the trader determined compared to the strike price. If a trade ends "Out the Money" the trader has lost.

Payout- The amount of profit the trader will receive if the trade end "In the Money"

 

Put Option – Choosing "Put" on your trade means that you thing the price of the asset will be lower at the time of execution than at the time of expiry.

 

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