If you’re trying to get into trading binary options, the following is a great guide from One Two Trade. Trading binary options doesn’t have to be as simple or as complicated as it seems. If you’re into trading financial instruments, or more recently betting, then you’ve probably seen or heard about this binary options thing.
Binary options are a class of a financial instrument called an option. Basically, an option is buying the right, but not the obligation to take an action in the future. It sounds complicated, but it’s best explained in an example. Suppose you might want to buy a ticket to a movie on a Friday, but you don’t know what the price would be, and you can only buy movie tickets the night of the showing. Historically movie tickets are normally $20 for a movie, but sometimes the price goes up and other times the price goes down. An option contract, would allow you to buy the right, but not the obligation to purchase the movie ticket for $20 at the time of the movie showing, regardless of what the actual price of the is that night. Now for this convenience, you have to pay $2. When show time comes around, if the price of a movie ticket is less than $20, you simply let your option expire, and you can pay whatever the price for the movie was, plus the $2 for the option contract. If the movie ticket was greater than $20, you can exercise your option, buy the ticket for $20, and you would only end up paying $22 to see the movie. $20 for the ticket plus the $2 you paid for the right to purchase the ticket at that price. Now if you wanted to make money, all you would have to do is make that you sell the movie ticket for more than $22. If on the night of the showing, a movie ticket was $30, you could make $8 selling your ticket.
The previous example was for a regular option. A binary option is different in that the amount of money you can make is pre-determined when you purchase the option. Sometimes you’ll hear binary options called digital options or “all or nothing” options because either you make a specified amount of money, or nothing at all. Using the same example, lets say you want to make money trading binary options. In the previous example, you would of had to buy an option for $2, and then hope that the price of a movie ticket was over $22 on Friday. You would then sell the movie ticket and collect the difference between the price you paid for the movie ticket and your option, and the actual price of the movie ticket that night. If the movie ticket ended up being $30, you would make $8.
A binary option is different. Say you just want to make money and aren’t planning on going to the movie at all. A binary option is you buying a contract from a binary options broker that says, “on Friday, if the price of the movie is over $20, I’ll (the binary option broker) will pay you 50% of your investment. But, if the price is lower than $20, you get nothing.” So say a binary option is $10 in this case and you buy one. On Friday, the price of a movie ticket is $25. You get $5. Which means you’ve turned $10 into $15. Much less complicated right?
With binary options, you don’t have to worry about how far the price moves, all you need to know is if it is over or under a certain amount. If we use the last example of movie tickets, another neat feature of binary options is that you aren’t trading movie tickets at all. Say the movie theater only has ten ticket to sell. If you are trading regular options, you would only be able to buy ten options contracts, because you are physically dealing with the movie tickets. With binary options, you don’t have to purchase the movie ticket at all, so there is no limit to how many binary options you can purchase.
If you want to trade binary options, One Two Trade is a great company for getting started. They’ll explain the basics of trading binary options and all the strategies that come along with it. Most other binary options brokers will make you pay extra for the information, or won’t give it to you at all. They know trading can be difficult in the beginning and it will take a little while to get the hang of binary options trading, even with a lot of explanation’s. That’s why they give you a lot of support. The more trades you make, the more money you can make. They want you to be as successful as you can, unlike some binary options brokers who want to turn binary options into a betting game.
While binary options are simple to get the basics, there is a lot of strategy to consistently make smart trades that will make you money. One of the downsides to binary options trading is that you lose all of your investment if you make the wrong move. But, on the upside, you know the exact risk you’re taking before hand, and you don’t have to pay any fees to make trades. If you’re getting started with binary options trading, you can’t make a mistake by going with binary options and One Two Trade as your binary options broker.
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