Exotic Options

Binary Options Trades - Invest in Binary Options - Can I make Money Doing This?

There are a few forms of binary option trading but each trade always boils down to whether the contract is in the money or not. The market for binary option trading is extremely fast paced - aspirations are dated in minutes and hours and not days or weeks. A good day trader in the binaries market will make extremely high yields - and quickly.

High Yield - High Risk Investing - All in a Days Work for a Binary Option Trader
Typical yields on a binary option contract fall anywhere from 60-81% depending on the particular issue and broker. As you might expect, given the rapid/hourly turnover computing a compounded return is essentially impossible. Consider this elementary payout example.

We'll first examine a contract that expires favorably. If you invested $200 in a put contract that paid 75% return expired in the money what would the cash payout be? The payout on your $200 position would be $350, including your initial investment of $200 plus $150 in profit.

What Happens When Things Go Wrong
But what about a binary option scenario which expires unfavorably? Much will hang on what type of contracts your broker writes. Most of the time contracts are held to maturity, but some brokers allow investors to sell unfavorable positions (at a substantial loss). Brokers that require holding to maturity do sometimes have a fixed payout on out of the money contracts - saving the hassle of trying to squeeze blood from a stone. In some cases there is no payout and the trader is stuck with what they've got. Any way you look at it, unfavorable trades are hard to salvage.

Traders with capital and are prevented from getting access to plain vanilla options instead use the low micro capital

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Traders that have Low capital and are prevented from getting access to plain vanilla options instead Invest in Binary Options instead.

The New Binary Options ..are they any better than the "traditional Options"?

I am going to assume you have some familiarity with traditional Option ; you know, puts and calls.

If Not skip to the section below "the Basics".Read it a couple of times even if you sort of think you get it.

You have to be clear in your mind what a put or a call does without thinking..just like a sailor doesn't have to think about port from starboard. [ port is left ..LOL ]

I have been trading Options for 10 years and I can tell you that it is a great way to make big money on small initial investments.It is also a great way to lose money fast

The Good thing about the New Binary products is you can dip your toe in and make small trades and you won't be paying big comisions that make you feel like you are getting jipped by your broker

I think you will learn quicker this way because even if it is only $50 you will have skin in the game trading Binary Options

Another Thing is that There is Frequently a Requirement of having a Margin account in order to do Most Option trading

Many Brokers that may let you open an regular stock account with a few hundred dollars will insist on a $5,000 ,$10,000 or more account minimum for margin / option accounts.

That may leave you out

Another thing is that many traditional brokers such as Schwab , Ameritrade ..etc...Don't offer Binary Options

Binary Options allow you to start small and pay no commisions to Invest in Binary Options

So if you think you would like to Try out The Fast Profit World of Binary Options the company I am using is offering a

Presidents Day promotion to boost your profits:

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Check out today's special trading promotion!

Steps to Successful Trade Stock Options

Short of having a crystal ball, picking winners when stock option trading is
not as hard as many people would have you believe. In the first place, when
considering purchasing or selling stock options, you need to conduct
extensive research on the underlying stock yourself, or rely on someone else
to do it for you - someone you trust. Many factors must be considered.
Invest in Binary Options

Among these are:

1. The stock's past history and movement.

2. Expected earnings reports of the stock's parent company.

3. Volatility and volume of shares traded daily.

4. Any current news concerning the company's growth or profitability.

5. The price of the option with respect to how you think the stock will
perform. If you do not feel the stock's movement will handily offset the
cost of the option, plus the trading fees, then buying or selling the option
would be fruitless.

6. Supply and demand of the underlying stock. (Industry group market
action.)

Once you have decided upon which stock to pick, you next need to decide
whether you believe the stock's price is likely to rise or fall. (With
stock options you can make money in either direction.)

Invest in Binary Options

By purchasing a Call option:

1. You expect the price of the underlying stock to rise, so you can
then purchase it at the lower strike price, making a profit in the transaction.

2. You have the right to control 100 shares of stock for a fraction of
the cost of purchasing the stock outright.

3. You are managing your risk by limiting the downside to the premium
paid for the option. The major downside to buying any option is time decay.
Your option expires within a finite period of time. If the underlying stock
price behaves as expected, you will not need to be concerned about
execution.

Having shown you the benefits of buying Calls over the risks of
purchasing the stocks outright, we must emphasize the fact that buying
short-term Calls has its associated risks as well. A Call buyer, especially
a short-term Call buyer, is severely limited by the time-decay factor. The
nearer to the expiration of an option, the less the option is worth, and the
less time is remaining for the option to become profitable. Within the
leverage used by gambling casinos (the house), the concept of short-term
Call buying is completely understood, as well as exploited, as gamblers are
considered short-term Call buyers.

When you choose a stock for short-term Call buying, you not only must
carefully consider the proper stock for the type of option you are
purchasing, you must also decide which direction the stock will move, then,
that movement must occur within a specified, very limited period of time.
Many investors have gone broke by attempting to make those same decisions.
In short, time is not on the side of the short-term option buyer. It is on
the side of the option seller.

Summary:
1. Buying stocks is risky.

2. Buying short-term options is less risky, but still risky.

3. Selling short-term options is the least risky, especially with a hedge, or insurance.

By selling a Call option:

1. You expect the underlying stock price to fall, so the option will not be
exercised, but expire, worthless.

2. You can capture the entire premium that was paid to you, as profit. If the
underlying stock price rises, you are obligated to sell 100 shares of stock
at the lower strike price. If you do not already own those shares, you would then
have to buy them at a higher market value, then sell them at the strike price, in order
to meet your obligation. This situation is called a "Naked," or "Uncovered" position, and
is extremely dangerous. Anytime you sell a Call option you should consider
buying the same option with a slightly lower strike price, and longer
expiration date. This will reduce your profit potential, but will also
reduce your risk considerably. (Remember the parallel twins, Risk and Reward

- If you want to reduce risk, you must also give up some degree of potential
rewards. You may wish to lower your cost basis in the stock, to the extent
of the premium received.

By purchasing a Put option:

1. You expect the price of the underlying stock to fall, allowing you
to sell stock at the higher strike price, and thereby earning a profit.

2. This option is also used in a combination strategy as a hedge
against selling Puts. We will explore that strategy later, in detail.

3. Buying Put options could also be used as a hedge, or insurance,
against the possibility of a price drop in stock you already own. Consider
the following:

You own 100 shares of ABC stock, and are concerned that the stock price
could suddenly fall. You purchase a Put option on the same stock, with a
strike price at current market value. If your stock falls in price, you
would have the right to exercise your option and sell 100 shares of ABC
stock at the higher strike price. The premium you paid for the option could
be far less than the loss you would have incurred without that insurance. In
this instance buying Puts acted as a hedge against the possibility of a
price decrease in the stocks you already own. If the price of the underlying
stock increases, your loss is limited to the premium you paid for the
option. The option acts as an insurance policy against possible loss.

Selling a Put option without an opposing hedge -"Naked"
You expect the price of the underlying stock to increase, causing the
Put option you sold to expire worthless. You can then capture the entire
premium paid to you, as profit. If the underlying stock price were to fall
below the strike price, then you would be obligated to purchase the stock at
the strike price, or pay the difference between the strike price and the
stock price, if you do not want to own the stock. Your upside is limited to
the premium received for selling the option. Your downside is potentially
unlimited to the base value of whatever you could sell the stock for on the
open market, or to the difference between the strike price and the stock
price. This is a "Naked," or "Uncovered" position, and should never be
allowed to occur, unintentionally. Without the implementation of combination
strategies, the main objective of the Put seller is to hope the option
expires, allowing him to capture the entire option premium as profit.
Nearing expiration, if the stock price moves below the strike price,
changing the option's value to ITM, and highly vulnerable to exercise, then
the option seller must move quickly to buy back the option, perhaps
lessening his profit potential, while also managing his risk. Even so, a
small loss would be better than having to buy 100 shares of stock at
inflated prices. Also, the loss can be immediately compensated for by
simultaneously selling another Put expiring in the following month. So you can use
OPM (Other People's Money) to buffer downside risks, while buying more time
for the stock price to rise.

Options Investing, when done properly, can drastically reduce, or even
eliminate, these two stumbling blocks to stock market success.