A binary option is a type of trade in which there is a fixed return, and just one of two possible outcomes. You take out a contract that highlights a fixed priced within a certain time limit. This contract is on an asset such as a stock index, a stock (like IBM, Facebook, or Microsoft), a currency pair (like GBP/EUR), a commodity (oil, silver, palladium, coffee), or a market (like NASDAQ, FTSE, Dow Jones). The strike price indicates the price at which the asset’s owner buys or sells.
To trade in binary options, you must sign up with a platform like Binary.com. You can choose to call it, which means you expect the value of your asset to rise, or you can put it, which means you think the value of your asset will drop. It is a very flexible type of trading, because you can choose your asset, predict the outcome, and determine when this will happen by. The only unknown factor is whether or not your predictions are right.
Binary trading is very different from ordinary trading. In an ordinary trade, you become the owner of an asset and you can keep it for as long as you want. With options, you don’t own assets, you trade on their variances. For instance, if you option trade in Apple, you don’t own a piece of Apple. You simply guess whether the Apple stocks will go up or down. With some financial knowledge, training in which is offered through platforms like Binary.com, you can be quite accurate in these predictions.
Binary options trading is becoming increasingly common and popular. This is because, while they are high risk, the possible returns are significant. Furthermore, you usually don’t need a lot of money to make a trade. Most of all, however, binary options are accessible to anyone with an internet connection.
How to Make Money with Binary Options
A few tips to help you make money in this type of trading:
- Use the most liquid and active securities. These represent the companies that are growing, so their prices are likely to rise.
- If the market is rising, use options that you think will soon settle and therefore drop in price somewhat.
- Quantity is more important than quality, which is very rare nowadays. The only thing that matters to you is how much it moves, after all. You don’t hold a physical asset, so the quality of the company is not as relevant.
- Consider it for hedging. If you feel that you have made the wrong prediction, you can hedge your contract and thereby avoid a significant loss.
Binary options trading is incredibly popular for good reason. However, you must also be realistic about risk. At the end of the day, you are gambling to a degree and you should therefore never invest more than you can afford to lose. Also, always remember that you win some and you lose some, so don’t be disheartened if the profits don’t seem to be rolling in just yet.