Binary Options Trading - What, Why, How?

Options:
Options Trading is a type of derivative financial instrument that involves two parties establishing a contract to buy or sell. The price movement of an option depends on the value of the underlying asset. The underlying asset can be stocks, bonds, currency, commodities etc. The contract has a specific time frame of expiry. Parties gain from correct prediction of the price movement.

Binary Options:
Need fast and easy income? Compared to other traditional methods of trading, binary options are easier to understand and more profitable. Binary option, as the name suggests, consists of two options – up or down. You can make profit when your prediction is correct about price movement of the underlying asset. However, both of the options are sometimes profitable when traded together.

Call & Put:
The terms “call option” and “put option” are familiar to those who are engaged in futures, options, and forex trading. When you predict that the price of a particular commodity, or stock, or index, or currency will continue to increase for a determined period, you buy a call option. Simply, when you predict the decrease of that price for a determined period, you buy a put option.

Risk Minimization:
What would you do if your prediction is not correct? You lose your investment. Some brokerage sites refund a little portion of your investment in this case. Some brokers pay up to 15% of your investment. But you still lose 85% and this loss is not too insignificant. You can minimize this risk of loss by “hedging.” Hedging means covering or minimizing the risk. For example, you buy a call option for $100, predicting the potential price rise of the asset. When your prediction is right, you’ll probably earn 70% profit which is $70 and if your prediction is wrong, you lose $85. By hedging, you could minimize this loss. When you see the price movement is opposite, you buy a put option for another $100. So, if the first choice is a loss of $85, the second option is in profit of $70, making net loss of $15 only. Without hedging, you’ll probably need to win more than fifty percent of your trade but with hedging; you can make profit by winning only 25% of your trade.

Profitability:
Profit is usually 70% in an hour. There are hourly, daily, weekly, monthly options available. People usually prefer binary options contract that has hourly or daily expiration time frame, instead of long expiration contracts. “Touch option” is another type which can generate you a profit as high as 300% to 500% in an hour! Touch option has a pretty high payout but its probability of profit is low. Any option trading requires analysis of past data and price movement records in order to minimize risk.

Payment Method:
Payment method is very easy. Almost all brokerage sites offer debit/credit cards, wire transfer, e-currencies, and other domestic payment methods. With debit/credit cards you can make payment and also withdraw your profit from ATMs almost instantly.

By: Trade Mill

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