Now Anyone Can Make Money Off The Stock Market, With Binary Options Trading!
If you have ever wanted to learn online trading but didn't have the funds or know how to start, there is FINALLY an answer!
Introducing Binary Options Trading: Although they have been available in other markets for some years, the United States has now just caught up and introduced binary options trading to the traders' portfolio of financial tools. Binary options, or fixed return options as they are known on the American Stock Exchange, have been available in America since the middle of 2008, and are very simple to understand.
Introducing Binary Options Trading: Although they have been available in other markets for some years, the United States has now just caught up and introduced binary options trading to the traders' portfolio of financial tools. Binary options, or fixed return options as they are known on the American Stock Exchange, have been available in America since the middle of 2008, and are very simple to understand.
What Are Binary Options?
And How To Make Money Trading Online
Binaries are also known as all-or-nothing options, digital options, or Fixed Return Options (FROs), each name stressing the 0-1 nature of the options. This is because there are two possible outcomes to a binary option, both of which are understood by the investor prior to purchasing the option.
A binary option trade on the trading platform may look something like this:
An investor purchases a Microsoft binary option for $10, with the opinion that at the end of the day Microsoft's shares will be higher than they currently stand. If he is correct then we offer a 71% return on his investment.
Binary option outcome:
1 - If at the end of the day, Microsoft is indeed higher than at the time the option was purchased, then we will pay the investor a $17.10 payout
0 - Should the shares be lower, then we will refund the investor $1.50
This means that when the contract is purchased, the investor knows that he will receive either $17.10 or $1.50. These values will obviously be much greater, the larger the investment. An investment of $1,000 with a 71% payout will result in a $1,710 payout or a $150 refund.
What is unique about trading binary options?
There are three major differences between binary options and regular (known as vanilla) options:
trade binary options
These differences have several consequences:
1 The short term multiple expiry times means investors can make an instant profit on their binary options and are more flexible in their option investments
2 In vanilla options, an investor pays per contract (i.e. point). Subsequently the investor will profit or lose an amount depending on the number of points difference between the expiry level and the strike price. Unlike in binary options where the two outcomes are set from the start
3 An investor in a binary option must hold onto his option until the expiry date. He must therefore take more care when purchasing his options as he cannot sell them once they are purchased Trading binary options on our recommended trading platforms is a novel and interesting method of investing in the financial markets. They are more straightforward and flexible than traditional options but as with all investments, planning ahead is an important part of succeeding.
Glossary Of Terms
If you're not completely familiar with the various trading platforms or how binary options work, the glossary below could prove helpful for learning some common terms & phrases and getting yourself up-to-speed.
Binary Options
Binary options, also known as digital options, bet options, or all-or-nothing options, are contracts which have only two possible outcomes - either they win, or they lose - therefore binary by nature.
A binary option involves a fixed payout after the underlying stock meets or exceeds its predetermined threshold or strike price.
Values of binary options payouts are determined at the start of the contract and aren't affected by the magnitude of movement of the stock value.
Binary call options pay the predetermined amount providing the price of the underlying security exceeds the strike price at expiration.
Similary, binary put options pay the predetermined price if the price of the unerlying security is trading at less than the option strike price at expiration.
Binary Call Options
Binary call options gain value when the underlying security is trading at more than the strike price at expiration. Select "Call" to bet that the underlying security will exceed the option's strike price at expiration.
Binary Put Options
Binary put options gain value when the underlying security is trading at less than the strike price at expiration. Select "Put" to bet that the underlying security will fall below the option's strike price at expiration.
Payout
The amount of money earned from a trade or investment.
Strike Price
The strike price is determined by the price of the underlying security at the moment at which the option is purchased. When the option expires, the price of the underlying security is compared to the strike price to determine whether the option has gained value ("in the money") or lost value ("out of the money").
Expiration
The time and date at which the value of the underlying asset is judged against the strike price to determine payoff. At expiration, the option becomes void an ceases to trade.
In the Money
An option is said to be "in the money" if the option gains value upon expiration. A put option is "in the money" if the price of the underlying security is below the strike price. A call option is "in the money" if the price of the underlying security is above the strike price.
Out of the money
An option is said to be "out of the money" if the option loses value upon expiration. A put option is "out of the money" if the price of the underlying security is above the strike price. A call option is "out of the money" if the price of the underlying security is below the strike price.
At the money
An option is at-the-money if the strike price of the option equals the market price of the underlying security. This can also be considered the "break even point" since the option neither gains in or loses value and the payout equals the original amount traded.
Binary Options
Binary options, also known as digital options, bet options, or all-or-nothing options, are contracts which have only two possible outcomes - either they win, or they lose - therefore binary by nature.
A binary option involves a fixed payout after the underlying stock meets or exceeds its predetermined threshold or strike price.
Values of binary options payouts are determined at the start of the contract and aren't affected by the magnitude of movement of the stock value.
Binary call options pay the predetermined amount providing the price of the underlying security exceeds the strike price at expiration.
Similary, binary put options pay the predetermined price if the price of the unerlying security is trading at less than the option strike price at expiration.
Binary Call Options
Binary call options gain value when the underlying security is trading at more than the strike price at expiration. Select "Call" to bet that the underlying security will exceed the option's strike price at expiration.
Binary Put Options
Binary put options gain value when the underlying security is trading at less than the strike price at expiration. Select "Put" to bet that the underlying security will fall below the option's strike price at expiration.
Payout
The amount of money earned from a trade or investment.
Strike Price
The strike price is determined by the price of the underlying security at the moment at which the option is purchased. When the option expires, the price of the underlying security is compared to the strike price to determine whether the option has gained value ("in the money") or lost value ("out of the money").
Expiration
The time and date at which the value of the underlying asset is judged against the strike price to determine payoff. At expiration, the option becomes void an ceases to trade.
In the Money
An option is said to be "in the money" if the option gains value upon expiration. A put option is "in the money" if the price of the underlying security is below the strike price. A call option is "in the money" if the price of the underlying security is above the strike price.
Out of the money
An option is said to be "out of the money" if the option loses value upon expiration. A put option is "out of the money" if the price of the underlying security is above the strike price. A call option is "out of the money" if the price of the underlying security is below the strike price.
At the money
An option is at-the-money if the strike price of the option equals the market price of the underlying security. This can also be considered the "break even point" since the option neither gains in or loses value and the payout equals the original amount traded.
Reader Feedback
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Eamon13
Feb 12, 2010 @ 12:10 pm | delete
- Interesting...wish I had the background/experience to understand it. Your lens looks well organized and your knowledge of the subject is clear.
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Mart903
Feb 11, 2010 @ 4:23 pm | delete
- Nice start on this quite appealing subject. Congratulations,.. keep it up!
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