Trading Binary Options | Binary Option | Binary Put Option

Binary options are simple. There are two types of binary option - call and put. If you buy a call and the stock price goes up, you make money. Likewise if you buy a put and the stock goes down, you make money. Make sense? Let's review: Call - up is good. Put - down is good.

You Don't Have to Care How Much the Stock Price Moves

Seriously... you don't care whether Microsoft goes up a penny or a dollar. If you own a call binary option, you only care that the price goes up by expiration (usually at the top of the hour).

You Can Make the Trade and Walk Away

Once you make your trade, you can literally walk away and make a cup of coffee or something - because all the elements of the contracts are fixed: the price (at purchase time), the amount of the contract (again, set at purchase), the expiration (top of the hour), the in the money yield (60-75%-again set at purchase), the out of the money yield (0-15%), and the security traded (MSFT, GOOG, Nasdaq, etc.)

Your Position Is Already Locked in to Sell At Expiration

Once the contract is made the only variable is the underlying stock price. No worrying about "getting out too early" or trying to figure out when to sell. The contract is fixed - your position is already promised to be sold (at the top of the hour) when you buy it. Does that make sense?

Let's say for example you think Google's stock price is too high and is going to come down. The situation is it is 10:15am and you have $200 to play with in your account and decide to make a trade. You decide to buy a binary put option on Google with your $200, expiring at 11:00am and paying out 75% profit in the money and 15% return of capital out of the money. Google's price when you made the trade was $579.00/share.

In a Binary Put Option You Want the Price of the Stock to Fall

If Google's stock price begins to fall (from $579.00), your binary put option is in the money and so long as nothing changes your payout will be $350 ($200 investment plus $150 profit). If things turn sour and the Google closes above the strike price of $579.00 at 11:00am then you'll receive $30 (15% return of investment with $170 loss). That's a wide range of outcomes... but you can hedge against losses.

You Do Not Care How Much Google's Price Falls

In a binary put option, you do not care how much Google's stock price falls. You do not care what Google's stock price does (in our example) after 11:00am. You only care where Google's price is AT 11:00am relative to the contract you made at 10:15am.

Even a 1 Cent Fall in Price Pays Out 75%

You read that correctly. In our example, if Google's price at 11:00am is $578.99 or $0.01 or anywhere in between, your binary put option is in the money and you just made $150 profit. *smiles*

Being able to tell which direction the market is going is a key component in deciding whether (and what) to trade on any given day. One way to get information is by reading free daily binary options tips that gauge market sentiment at the open of trading - an important advantage when making these high yield short term trades. Here's a sampling of recent posts.

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