Many investors, even experienced ones, do not necessarily know what binary options are. They are an often medium-paced, medium-risk, effective option for moderate to substantial monetary returns. More prominent in the European Union than the United States, they are still an interesting and exciting stock option for buyers the world over. Below is a list that describes binary options trading online, as well as some of the unique qualities and precautions surrounding the practice. The goal is Binary Option Trading Made Simple!
Anything with the word “binary” in it means it comes in two’s. In this case, it means an “either-or” outcome. Binary options (called “BOs” hereafter for the sake of ease) are stocks that have only one of two outcomes: they will pay out, or they won’t. The likelihood of success as well as the payout itself depends upon the type of BO you purchase.
BOs are generally divided into four categories: cash-or-nothing calls, cash-or-nothing-puts, asset-or-nothing calls, and trade online asset-or-nothing puts. Cash-or-nothing means their is a currency payout, or there isn’t. Asset-or-nothing means there is a payout of an asset unit in some way equal to the currency value, or there isn’t. A call means payout occurs when the stock is above the strike at maturity, while a put pays out when it is below the strike.
As with all stocks, there are varying degrees of risk investors should pay close attention to. As a general rule, when there is higher risk, there is a chance for a higher payout.
BOs are generally a little higher risk than most moderate-risk stocks. This is because there is less regulation, especially in the exchanges of Cypress, Turkey, and Greece, where BOs are the most popular. However, the all-or-nothing payout system helps to mitigate a great deal of this risk.
The assets you can trade with include stocks, Forex, and a nearly endless list of commodities (including precious and semi-precious metals).
Because they are traded online, it is possible to undertake binary options trading yourself under some circumstances. However, it is strongly suggested that you go with binary options brokers, at least at first. They further help to mitigate potential losses and can teach you what you need to know before you break out on your own.
Investors seeking the best brokers should speak with ones who focus on diversified portfolios and have hands in both domestic and international exchanges and markets. An ideal broker will be both an advocate and educator for the investor.