Binary option trading is a kind of trading system wherein a buyer goes into a contract to purchase a product, in this case it is called an asset, at a pre-determined price. In binary option trading, the asset has a time of expiry by which the buyer has to decide whether or not he will take on the asset. The fixed price involved in binary option trading is called the strike price. It is the price that the owner either buys or sells the asset. Moreover, in binary option trading, the owner already determines the amount to be invested, and with this, the buyer and the owner already knows the potential gain or loss even at the beginning of the contract. There are only two outcomes to choose from in binary option trading. It is either the owner receives a payout when the option expires in-the-money, or the owner will receive nothing when the option expires out-of-the-money. Nonetheless, if “anyoption” is utilized in binary option trading, 15% of the invested amount will be returned to the owner if the option expires out-of-the-money.
Different Aspects of Binary Option Trading
There are actually three aspects that need to be understood in binary option trading. These aspects include (1) the asset, (2) the time of expiry, and (3) the asset direction. In binary option trading, the asset refers to the item that is being traded. It can be stocks, commodities, or currencies. In the case of foreign exchange, currencies are the ones being involved. Next is the time of expiry. The binary option trading time of expiry is basically the fixed time the option will end. It can be an hour, a day, a week, or even a month. Last is the asset direction. In binary option trading, the asset direction means the movement of the asset, which can either be up or down. If the buyer thinks that the asset will move up by the time of expiry, then he purchases a call option. However, if the buyer thinks that the asset will move down by expiry time, then he purchases the put option. The flexibility of binary option trading is one of the main reasons why it is preferred by most traders.
How to Do Binary Option Trading
What is advantageous about binary option trading is that anyone can perform the trade immediately. A trader just has to open an account for binary option trading and of course, deposit an amount in that account. Without further explanation, an amount of money has to be deposited because that money will be used in the trading. In simple terms, if your account does not have enough money or does not have any money at all, then you will not be capable of doing binary option trading. Next is you choose the currency pair that will be traded, for example, USD and GBP, or EUR and CAD. After that, choose the amount to be invested for that binary option. Then you have to decide whether the asset will increase or not. If you think that it will increase, then choose the call option. On the other hand, if you think that it will decrease, then choose the put option. Lastly, choose the expiry date, may it be a month, week, day, or hour.
Why Choose Binary Option Trading
As of present time, binary option trading has increased in so far as popularity is concerned. More and more investors are using binary option trading because of reasons most investors are amenable. The first reason is that the option buyer knows and controls the risks involved in binary option trading. If the option expires, not all of the amount invested will be lost. Rather, only 85% is lost. Secondly, binary option trading provides the buyers easy profits because an incremental change in asset price is only needed. Third on the list is that buyers who engage in binary option trading do not need to have a wide knowledge on the market he is trading. An intellectual direction of an asset is only required since the magnitude of the movement of the asset is not anymore important. Lastly, binary option trading is buyer friendly. Buyers are given the freedom to select the expiry time and date, asset, as well as the price direction. The buyer then knows the gains and losses from the trade. He just has to see the direction where the asset is moving to.