Binary Options Characteristics

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Binary Options Characteristics

Hello traders! Today I’ve prepared for you 11 things that I think perfectly describe what binary options are and how they work. I noted really just the most important ones which are elementary. So let’s look at it.

  • Unlike trading on Forex, binary options traders are not limited by the leverage effect. (Leverage effect allows you to trade with more resources than you have, so your profit or loss can be far greater. In the most cases, the foreign capital is provided by a broker and of course it is not for free.)
  • You know your profit or loss from individual trades ahead and you can’t lose more money than you invest (for Forex it is the exact opposite).
  • A number of your profits from particular binary option does not depend on the amount of the price change of the underlying asset. (What I am trying to say is that any price change will not change the profit. Your profit is set ahead and it can’t change.)
  • The payouts and losses are clearly defined in advance for all binary options trades!
  • Most of binary options brokers listed on our website (see List of binary option brokers) offer early close options. When the traders consider the price favorable, this feature allows them to exit the trade at any time prior to closing time. That allows traders to gain quick profits from any trade or minimize their losses. For example, you can sell the option when you see the trade is not going to be profitable and you will not lose 100% of the money from your trade.
  • All listed brokers on this page (and most of all other brokers) are offering payouts from 69 to 90% for a huge variety of assets. To see the exact payout percentage you have to visit the broker internet page.
  • Binary option trading is quite easy. You even don’t need any previous experience with trading. (It is significantly easier than Forex trading.)
  • There are no hidden fees on binary option trading (when we talk about regulated brokers). Occasionally there is a fee for inactivity or withdrawals fee, but that doesn’t happen very frequently. For example, the IQ Option broker offers withdrawals for free.
  • You don’t have to be an experienced professional trader, mathematical genius nor supernaturally smart individual to profit from binary option trading. Literally, everyone can successfully trade binary options, whether you’re a student, a mother on maternity leave or accountant.
  • All binary options trades have just two possible outcomes. That’s why we are calling them binary. (The binary system also only has two possibilities, 1 and 0.)
  • When you open a position with the underlying asset, it doesn’t mean, that you are buying it. You only predict the direction of price change of the asset.

I hope you like these characteristics of binary options. It was written mainly for novice traders and people, who don’t know binary options at all. Do you have any other idea about the characteristics? Leave a comment! Anything you share with us can help novice traders. Thank you ��

Author

More about the author Step

I’ve wanted to build a business of some kind and earn money since I was in middle school. I wasn’t very successful though until my senior year in highschool, when I finally started to think about doing online business. Nowadays I profitably trade binary options full-time and thus gladly share my experiences with you. More posts by this author

2 Responses to “Binary Options Characteristics”

Good blog post. I want to thank you for interesting and helpful information and I like your point of view. Thank you!- I love to read this type of material Good and attractive information I take from it.. Thank you for posting such a good article.

Binary Option

What is a Binary Option?

A binary option is a financial product where the buyer receives a payout or loses their investment, based on if the option expires in the money. Binary options depend on the outcome of a “yes or no” proposition, hence the name “binary.” Binary options have an expiry date and/or time. At the time of expiry, the price of the underlying asset must be on the correct side of the strike price (based on the trade taken) for the trader to make a profit.

A binary option automatically exercises, meaning the gain or loss on the trade is automatically credited or debited to the trader’s account when the option expires.

Binary Options Outside the US

Basics of a Binary Option

A binary option may be as simple as whether the share price of ABC will be above $25 on April 22, 2020, at 10:45 a.m. The trader makes a decision, either yes (it will be higher) or no (it will be lower).

Let’s say the trader thinks the price will be trading above $25, on that date and time, and is willing to bet $100 on it. If ABC shares trade above $25 at that date and time, the trader receives a payout per the terms agreed. For example, if the payout was 70%, the binary broker credits the trader’s account with $70.

If the price trades below $25 at that date and time, the trader was wrong and loses their $100 investment in the trade.

Best Binary Options Brokers 2020:
  • Binarium
    Binarium

    Best Choice!
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    Free Demo Account!
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  • Binomo
    Binomo

    Good Choice For Experienced Traders!!!

Key Takeaways

  • Binary options depend on the outcome of a “yes or no” proposition.
  • Traders receive a payout if the binary option expires in the money and incur a loss if it expires out of the money.
  • Binary options set a fixed payout and loss amount.
  • Binary options don’t allow traders to take a position in the underlying security.
  • Most binary options trading occurs outside the United States.

Difference Between Binary and Vanilla Options

A vanilla American option gives the holder the right to buy or sell an underlying asset at a specified price before the expiration date of the option. A European option is the same, except traders can only exercise that right on the expiration date. Vanilla options, or just “options,” provide the buyer with potential ownership of the underlying asset. When buying these options, traders have fixed risk, but profits vary depending on how far the price of the underlying asset moves.

Binary options differ in that they don’t provide the possibility of taking a position in the underlying asset. Binary options typically specify a fixed maximum payout, while maximum risk is limited to the amount invested in the option. Movement in the underlying asset doesn’t affect the payout received or loss incurred.

The profit or loss depends on whether the price of the underlying is on the correct side of the strike price. Some binary options can be closed before expiration, although this typically reduces the payout received (if the option is in the money).

Binary Options and Regulation

Binary options occasionally trade on platforms regulated by the Securities and Exchange Commission (SEC) and other regulatory agencies, but most binary options trading occurs outside the United States and may not be regulated. Unregulated binary options brokers don’t have to meet a particular standard; therefore, investors should be wary of the potential for fraud. Conversely, vanilla options trade on regulated U.S. exchanges and are subject to greater oversight.

Real World Binary Options Example

Nadex is a regulated binary options exchange in the United States. Nadex binary options are based on a “yes or no” proposition and allow traders to exit before expiry. The binary option’s entry price indicates the potential profit or loss, with all options expiring worth $100 or $0.

Let’s assume stock Colgate-Palmolive Co. (CL) is currently trading at $64.75. A binary option has a strike price of $65 and expires tomorrow at 12 p.m. The trader can buy the option for $40. If the price of the stock finishes above $65, the option expires in the money and is worth $100. The trader makes $60 ($100 – $40).

If the option expires and the price of the Colgate is below $65 (out of the money), the trader loses the $40 they put into the option. The potential profit and loss, combined, always equals $100 with a Nadex binary option.

If the trader wanted to make a more significant investment, he or she could change the number of options traded. For example, selecting three contracts, in this case, would up the risk to $120, and increase the profit potential to $180.

Non-Nadex binary options are similar, except they typically aren’t regulated in the United States, often can’t be exited before expiry, usually have fixed percentage payout for wins (whereas Nadex payouts fluctuate based on the price paid for the option) and may not trade in $100 increments.

The Characteristics of the Best Binary Options Trading

The Characteristics of the Best Binary Options Trading. Many Binary Options Brokers, by creating several pages, only put their advertisements. In fact, they advertise and introduce themselves. For knowing which broker is the best, Binary Options Traders cannot merely depend on the information presented at these pages.

There are a lot of sites which with listing Binary Options Brokers, claim that these Binary Options are the best, declaring they possess some characteristics and support them. Actually, the visitors are ignoring the fact that these listing sites include an advertising aspect and the site holders with getting advertisement prices list these brokers.

It is highly recommendable for those Binary Options traders who want to put money in this market, to test these brokers with minimum deposit. Then, if they are honest and there is no problem with the process of the payment, Binary Options traders could cooperate with them.

Otherwise, it is not recommended to trade in these brokers based on the listing sites ranks. This is due to the fact that these Binary options Listing Sites are for advertising purposes and out of the reality.

The Characteristics of the Best Binary Options Trading

Although, regulation for Binary Options lead to have an easier choice, it would not be a definite choice and solution for you, because even regulated brokers defraud traders. Regulation for Binary Options Brokers, is accomplished by paying an amount to certain organizations which supervise Binary Options’ financial accounts. It is possible for these Binary Options Brokers to bypass the observations and not to pay investors’ money.

Therefore, for making an investment in Financial Markets, especially Binary Options, you must always regard this general principle that you must invest an amount of money you can afford to lose, because there is no guarantee that the money can be returned.

In practice, you do not invest but buy a service which is playing in Binary Options Sites. This means, if a Binary Options Broker does not pay you, based on the terms and conditions available on most of the Binary Options Sites, you cannot claim your money back and seek for confidence on this topic. It is highly recommendable that those trader who cannot venture on these conditions and also cannot afford to lose money, do not enter this market.

The Characteristics of the Best Binary Options Trading

Best Binary Options Brokers 2020:
  • Binarium
    Binarium

    Best Choice!
    Free Trading Education!
    Free Demo Account!
    Big Sign-Up Bonus!

  • Binomo
    Binomo

    Good Choice For Experienced Traders!!!

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Binary Options Trading Guide
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