Binary Options 101

Screen Shot 2015-03-10 at 10.17.44 PMHave you ever heard of binary options? Binary options may sound complex but below is an easy to understand definition from Investopedia:

A type of option in which the payoff is structured to be either a fixed amount of compensation if the option expires in the money, or nothing at all if the option expires out of the money. The success of a binary option is thus based on a yes/no proposition, hence “binary”. A binary option automatically exercises, meaning the option holder does not have the choice to buy or sell the underlying asset.

Binary options work in that profit or loss is decided by the direction of the financial product rather than the amount that it is worth has changed.

Winning or losing is decided by whether the financial product finishes lower or higher at the time of a trade’s expiration than its level of the initiation point of the trade.

Trading binary options isn’t as hard as it sounds. It was created to make investing a little easier. You just choose one of two different choices when it comes to the binary option and you will either lose money or make money from the trade.

The next question you are probably wonder is how long the trade is. Do you make money the next day? The next hour? It’s a reasonable question to be wondering.

With binary options, you can decide how long you want the trade to run for and there are preset ending times for some as well. You can decide if you want your trade to last just one minutes, or you can decide to have the trade run for a whole 30 days. That’s what’s fun about binary option trading, you can deice yourself.

 

Are you interested in binary options? Why or why not?

 

Images from ETX Capital.

 

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