Binary options trading is a way of betting whether a certain outcome will happen. It gives you only two scenarios to choose from, either yes or no. When it comes to finances, binary options look at whether the price of an asset will be higher or lower at a certain point.
The most common type of binary trading is digital options that apply call or put/up or down action options. If you think the price of an asset will end up at or above the strike price, then the option is ‘call’, if lower then you purchase the option ‘put’. If you get it correct, you’ll get compensation in the form of the asset itself or money. If you are wrong, you receive nothing at home. This is why binary options also go by the name ‘all-or-nothing’ options.
So why should someone go for this kind of trading?
The simplest answer is that binary options trading is simple. You only have 2 options to choose from, option 1 is whether the price of the asset will go up, or option 2 that the price of the asset will go down. Price movement’s play no role in binary options trading it also doesn’t matter how much the prices move above or below the strike point, because at the end of the day the payout for a binary options trader is the same. Basically, you know what you’re getting into before you start trading.
Binary options can actually be less stressful than traditional trading options because once you have made your choice, the only thing you need to do is wait until the expiry of the contract to know whether you have made money or lost it.
There is a lot of flexibility in binary options trading, a contract can be less than a minute or have a span of several months depending on the broker offer. You are therefore able to apply your expertise too chose the right option. In as simple as it sounds, the trader has to be very knowledgeable in different fields for example shares, foreign exchange, financial analysis amongst others to be able to make the right call.
There are other types of binary options including ‘no touch’, where you predict that the price will not be move at all during the contract period, and you get compensation if you are correct, the ‘double touch’ where you have two price levels and predict which one you think will move during the period. If it happens, as per your predictions then you get compensation.
The fact that you do not have to worry about the closing price of an asset at the end of trading makes binary options trading very attractive to most traders, who may not be comfortable trying to predict pricing. Binary options are great for volatile trading assets like foreign exchange and also do very well for short term trading because you can have a contract that is under a minute long.
The amount you’ll get at the end of the contract period is set at the beginning and does not vary. If you have an interest in binary options, talk to your broker and see how you can take advantage of these type of trading.