Make money with binary options trading
Binary options, which are generally traded over-the-counter (OTC), offer investors ample opportunities to earn handsome profits from speculation. Of course, all profit-making opportunities come with associated risk levels, but with the help of binary options, traders can keep such risks at extremely low levels too.
Basics of Binary Options
Binary option contracts, much like their plain vanilla counterparts, are drawn up based on the value of an underlying asset. These assets can be commodities, company shares or even other financial instruments. Trading is done on the basis of the expectations of the traders as to whether the prices of these underlying assets would be moving up or down in future. Leading hedge funds, financial institutions and other large corporate financial bodies are the major players in this particular sector of the financial market.
Enhanced flexibility is one of the key features of binary options. These options can have various types of maturity periods, ranging from a few hours to even one week. Investors can purchase binary options by making an upfront payment (the option price or premium). The contract agreement needs to have a specified maturity period, a ‘strike price’ and other information related to the reference asset of the option.
What it means for the traders
Binary options essentially give the option-buyers (or, holders) the right to buy or sell the underlying asset at a specified future date (the date of maturity or expiration) at a pre-determined price-level (the strike price). There are two types of binary options available in the markets – the call and the put. If traders expect that the market price of the underlying asset would move above the strike price level, they should purchase a ‘call’ option, which would give them the right to (without any associated obligation) buy the reference asset at the lower, pre-determined strike price on the date of maturity. Conversely, if the expectation is for the price of the concerned asset to go down, investors should buy ‘put’ options.
The execution of binary options critically depends on whether the expectations of the option-holders actually materialise or not. For example, if a trader has a call option, and the market price actually exceeds the strike price on the maturity date, the option is said to be ‘in-the-money’. Under such circumstances, the holder would gain by executing his right to buy the asset. Conversely, if the market price moves contrary to the investor’s expectations and moves below the strike price, the option need not be executed at all (since the option holder has no obligations). In such cases, the option is said to be ‘out-of-the-money’. A put option (right to sell) can be ‘in-the-money’ or ‘out-of-the-money’ when the prices moves just in the opposite directions to the case discussed above.
One of the best features of binary options is that investors can start trading with an initial investment that can be as small as USD 10. Of course, expert traders would prefer to have much bigger investment portfolios. The time-lag between investment and accrual of profits is also minimal. In cases where the options become ‘out-of-the-money’, much of the losses can be recovered as well.
When handled with expertise, binary options can help traders earn high profit levels. Form your price-expectations with care and choose the type of option that matches your speculations.Incoming search terms:
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