Carrying Out a Binary Option Trade – Lesson 4

To execute a binary option trade, investors can use  online binary trading platforms such as  Anyoption, iOption and 24optionwhich are 100% web based and can be used by beginners and more advanced traders . The process of using an online binary trading platform in carrying out a  trade is as follows:

Carry out a binary option trade

The steps to carry out a binary option trade

  • Select the underlying asset like a currency pair  to be traded with like the GBP/JPY or EUR/USD , you can also
    choose other assets like stocks like Apple and Google, commodities like Gold and Crude Oil  and indices like the FTSE 100 and NASDAQ .
  • Select the investment amount that you want to invest with your trade . Also know the minimum deposit required by the broker. Usually $100-$200.
  • Decide the direction of the price movement so you will be able to know whether to buy a Call option or Put option. If you believe the asset will go up by the expiry period select up and vice versa.
  • Select the expiration Time you wish for the option you choose to buy a put or call for
  • Execute your trade by clicking Trade

Upon completing all of the above steps with one of the binary options trading platforms, all the investor has to do is to wait for the expiration time. If the option expires in the money, the investor will receive the full payout of between 60% to 80% inclusive of his capital. In the other case, they will most probably lose all their investment capital if the binary option expires out of the money.

Why do People Like to Binary Option Trade?

  • Regardless of whether the option expires out or in the money, the investor is well aware of the extent of his exposure.  For options expiring in the money, he will stand to gain between 60% to 80% of his investment capital. Whereas if the options expire out of the money will lose only 85% of his invest capital.
  • The movement in prices across strike price threshold need not be proportionate to the magnitude of payout for the option. A single tick is enough for the investor to reap the full return on a binary option.
  • An investor is not required to study the market in detail to know the extent of the price movements. All that is required for him to know is the direction in which the prices will move.
  • Because the trader is able to decide the underlying asset class to invest in, the expiration time and the type of option (Call or Put options) based on the direction of the prices, trading in binary option is extremely flexible.
  • Because of the short expiration time frame that ranges between hours, daily, weekly and monthly, investors are able to quickly turnaround their capital for more investment opportunities and hence maximizing their capital.

Move on to Lesson 5- The disadvantages of trading Binary Options