Binary Options Betting Explained

When the British Company dealing in financial derivatives and sports betting, IG Index, introduced binary options betting in 2003, investors in the financial markets gained another investment vehicle from which they can profit with. Today, binary options betting are dealt with by IG Index sister company called ‘Binary Bet.Com’. The company is also popularly known as ‘ExtraBet’ by many.

Like conventional financial spread betting, binary options betting also possess a two way price quotes that is the ‘Bid’ and ‘Offer’ quotes. Bets are based on how much dollar per basis point. However, the pricing of the bet is not determined by the value of the underlying asset but rather on the assessment on the direction of the market movements. It is for this very reason that binary options bets are quoted between the ranges of 0 to 100. The higher the assessment of the movement of the asset value within a fixed period, the higher is the amount of profit earned.

For example, let us assume that you are of the opinion that an offer/bid price for the FT100 index will close at a higher price like 86 – 90. In this scenario, the odds are considered high. Naturally, you also have to factor in the ‘time factor’ due to the fact that the longer the market moves according to its assessment and the closer it is towards the closing time of the market, the higher will the quote become until it reaches 96 – 100. In short, what the strong quotes imply is that the event is nearing accomplishment.

The transaction is termed as ‘binary options betting’ because until the expiry period is reached, there are just two possible outcome, either the bet goes lower or it goes higher. If the movement of the price finish at a higher price, the bet is probably going to be settled at 100. In the situation that movement of the price finishes at a lower note, the bet is most likely to be settled at 0. With binary options betting, you know what your maximum profit or loss is going to be and this permit an investor to lock in his or her profit or limit his or her losses before the expiry of the bet. In other words, before the bet expire, you can sell the bet off at the current market price. You can purchase a bet at the current price before it expires as well.

Often times, people tend to denote binary options betting as a ‘fixed odds’ bet or a ‘financial spread’ bet. These two descriptions are valid to a certain extent because for both these types of betting, the maximum profit or loss in known beforehand. Nevertheless, binary options betting permit you to cash out before the expiry of the bet in order to maximise your profit or minimize your loss. This early closure of the bet before expiry is not possible with the other two types of financial betting. In short, binary options betting give you the choice to continue or discontinue with a bet.

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