They are based on the options trading of securities conducted by large companies, banks, institutional investors and brokers who are daily transacting billions of dollars worth of options as a means of risk management and hedging.
The simplicity of binary options is, you have essentially a 50/50 chance of making the right decision (ie a yes/no proposition) and all you need to do is identify if the particular asset you are trading is will be going up or down in price.
The three basic types of options are high/low options where you predict whether the asset's price will end higher/lower as compared to the initial price; one-touch options that you decide will either go up or down; range/digital options where you determine which range the price will strike at.
"In the money" (ITM) refers to when the asset has a favorable strike price (price when the option is closed) relative to the current market price of the underlying asset.
For example, you would have an ITM call/buy option when you buy an asset below the current market price. Conversely, you would have an ITM put option when you sell the asset above the current market price. In both cases, you would be making a gain from the price differential (however other factors like cost of buying the option and fees would also need to be considered).
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At the time of the strike/expiration price, you need to make sure that the asset is on the "correct side" of the strike price in order to profit. The option is exercised when the stipulated time period - which can be as short as sixty seconds to as long as one month!
It's important to note that the outcome of a binary option will either be a gain or a loss. Traders will either receive a fixed amount profit payout if the option expires in the money or they will incur a loss if it expires out of the money.
The beauty of binary options, apart from the simple yes/no proposition, is that you can trade in a wide variety of assets ranging from currency pairs (forex), stock prices, cryptocurrency, gold, silver, oil, bonds, indices and also ETFs.
It is quite possible to generate consistent returns of 80-90% or even more from your investment, but the caveat is that you will need to test out the best strategies for you in order to have the best chance of trading successfully to win more and lose less.
That's why it's always a good idea to start trading using demo accounts in order to "test the waters" and make sure you don't lose any money at the outset.
We have narrowed down the 2 best binary options websites/platforms in the market where you can start trading instantly for free using demo accounts. Please be sure to thank us later on!
