No need to look elsewhere, this guide tells you everything you’ll need to know about Binary Options and will take about 3 minutes to read. If you do have any more questions you can email one of our expert analysts at firstname.lastname@example.org
A Binary Option is a type of option where the pay out is either a fixed amount or nothing – this gives the option it’s bi (nary) nature. They are sometimes known as ‘digital options’ or ‘all-or-nothing options.
Contracts for Binary Options have been available for a long time, directly sold to the buyer by the seller. These ‘over-the-counter’ options were considered ‘exotic’ until in 2008 the Securities and Exchange Commission approved their listing. Since then, the number of web-based binary options trading platforms providing a more simplified version of the trading exchange for binary options has risen to a number approaching the three figure mark. Binary Options can now be traded 24 hours a day, 7 days a week.
Unlike the Forex market which until recently was unregulated but now is, there is no set regulation for the binary options industry. Each company is regulated by the laws and regulations of the country they are registered in. This has seen many platforms based in tax-havens like Cyprus, the Caymen Islands and the British Virgin Island which do not have as strict financial laws as say the UK or Australia, but that does not mean that the companies are of ill-repute. It took some before the Forex market became fully regulated and Binary Options is still relatively fresh.
Although very similar in their trading hours and underlying assets, there are many differences in how the two are traded. The main difference between trading binary options and forex is in the risk and exposure. Because the movement in a currency pair or a commodity can be quite small, forex brokers will allow you to leverage your investment by up to 500:1. This means that the rewards can be greater but it also leaves you more exposed, thus amplifying your risk. Binary options however offer a fixed return for making a simple prediction on the movement of an asset over a fixed period of time. You can never lose more than you invested and some brokers even offer a refund of up to 15% on a losing trade.
What Can You Trade?
The list of underlying assets to trade Binary Options in keeps on growing, assets lists varying between platforms from 40 – 170. Currently you can trade a wide array of assets in Currencies – eg Euro/Dollar, Commodities – eg Gold, Stocks – eg Apple Inc and Indices – eg Dow Jones and now even Bonds. This is done during normal market trading hours with many platforms offering weekend investing too.
The simplicity in trading binary options makes it appealing to anyone with little or no trading experience. In its simplest form a binary option is a contract where the buyer pays for the right to receive a fixed return if the price of an underlying asset finished above or below a target price at a predetermined expiry time. The expiry time can be as little as 5 minutes and as long as a week and a trade can be made in just three easy steps:
You Choose An Asset – eg Gold
Choose The Direction – eg the price of Gold will be higher than the target price in an hour’s time
Choose The Amount To Invest and Click Buy
More and more investors are making the simple yes or no predictions to generate fixed profits of up to 60 – 360% on every trade. With only limited risk and trading opportunities every few minutes, the lure of large returns based on forecasting price movements, has seen the online binary option trading industry become one of the fastest growing and most popular industries online. As technology evolves digital trading becomes quicker and easier allowing traders to develop strategies and have increased opportunities to profit.