A Binary Option Trade is an investment option with a cash-or-nothing pay-out. This kind of trade has the possibility of resulting in one of two ways, either ‘In the Money’ or ‘Out of the Money.’ The results therefore are binary; either you win or you lose. This all-or-nothing form of investing is also referred to as a Fixed Return Option, FRO, because the pay-outs are set before the trade is made.
Making a Binary Option Investment
To execute a Binary Option trade you’ll have to:
- • Select an underlying asset
- • Predict the direction the asset will move
- • Choose the expiry time the option will close
- • Enter your investment
This is truly the simplest form of option trading out of all others on the market. The most important thing to REMEMBER is that you are not investing in the asset itself; you are only investing your funds on the prediction of what direction the underlying asset will move at the time the trade expires.
Trading Binary Options is much simpler than investing with traditional Vanilla Options. Binary Options have a fixed return rate, therefore day traders know before a Binary Option Trade is purchased what the pay-out rate will be for a successful trade. Binary Option Brokers offer different returns on investment rates per option, depending on market conditions and time of purchase.
Moving Forward with Binary Options
Binary Options have exploded onto the financial scene following on the heels of the closely related FOREX market. One of the greatest differences between Binary Options and FOREX is that with Binary Options, day traders are not concerned with how many pips an asset may move. It doesn’t matter if an asset moves one single pip or a hundred, as long as the day trader predicted the direction properly. If the direction of the asset’s movement is forecasted properly, then the investment is considered a success and will pay-out the prearranged winning percentage.
For further information about Binary Option Brokers – Click here.