How to Trade Binary Options

How to Trade Binary Options

Binary Options is a type of online trading that deals with speculating commodities, stocks, futures, index and currencies direction. Commodities are traded whether they are falling or rising, thus making options trading quite similar to forex trading.

You can make so much money off the internet within hours, daily or weekly, pending your desired trading time just by trading binary option. You are sure to trade binary options under a binary broker just like it is in forex, stocks and the futures market.

Guide on Binary Options Trading

Trading binary options online requires that you register with a binary option broker online. We’ll get a lot of binary options brokers online, but I do advice that you carry out diligent research and get one that suits your needs. You’ll have to move on further to pick the underlying asset of your choice, the time of expiry and the direction the investor predicts price is heading to. A financial asset could be an index (Nasdaq), forex (EUR/USD), stocks (e.g.Google) or a commodity (e.g silver). Binary Options trading offers lots of assets. The investor has to make some choices based on the time of expiry for each trade and this ranges from an hour to weeks. The investor decides the direction of the asset. If the investor feels the asset would go up, then calmly go by a CALL option and if on the other hand you think it would go down, then buy a PUT option. Read more on Binary Options daily setup

When a client decides on the direction of the market (up or down) within a specified period, he waits to see the point where market reached after the expiration of the time. When time expires on the investor above the strike price a CALL option is initiated or when price goes below the strike price then we have a PUT. A situation where his option goes below the strike price is a CALL or above is PUT. Please note here that a strike price is a price that the client sees before initiating his trades.

Example:

I want to show an example using pseudo stock ‘XYZ’. For the sake of this study, the amount invested and the stock value was fabricated for this case study.

Call Option for XYZ with 72% Return:

Amount invested: $100

Value of XYZ at Strike Point: $44.25

Possible Outcomes:

Value of XYZ at Expiration> $44.25 – Investor receives $172

Value of XYZ at Expiration< $44.25 – Investor receives $0

Put Option For XYZ with 72% Return:

Amount invested: $100

Value of XYZ at Strike Point: $44.25

Possible Outcomes:

Value of XYZ at Expiration> $44.25 – Investor receives $0

Value of XYZ at Expiration< $44.25 – Investor receives $172

Choosing an Underlying Asset

It is very important to choose an underlying asset after you must have chosen a trading platform. You can trade many assets via binary options, and the list keeps growing by the day. For instance you will discover that you can trade options on forex, commodities, stocks and even indices. At this point your level of familiarity would come into play with the market you find more comfortable.

Financial trading is not for everyone, but those that enjoy it constantly are always looking for newer financial products, which they can use to make money. Binary Options is fast gaining popularity as investors require less capital to trade them.