How to Trade Binary Options
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To trade binary options is about speculating in which direction an asset is likely to move. No shares need to be bought, no currencies traded. It is a simple and efficient way of investing in the financial markets with a small budget and limited trading skills, whilst also benefiting the more experienced trader too.
Trading on our platform is a matter of speculating higher or lower i.e. will the price of the underlying asset at a set time in the future be higher or lower than its current price, known as the strike price.
To trade binary options with us, an investor must select the underlying asset, the expiry time and the direction in which he speculates the asset will move. The underlying asset is what the option derives its value from and it could be an index (e.g. Nasdaq), commodity (e.g. Oil), currency pair which is also known as forex (e.g. EUR/USD) or stock e.g. (Apple), of which we have over 60 on offer. The expiry time of the binary option trade dictates when the contract ends and it can be the end of the nearest hour, or the end of the day, week or month. The investor then needs to consider the direction in which he believes the asset will move. If he thinks UP, then he will buy a CALL option. If he believes DOWN then he will buy a PUT option.
An option is considered in-the-money if it expires above the strike price in a Call option or below it in a Put. An option is considered out-of-the-money if it expires below the strike price in a Call option or above it in a Put. When you trade binary options you will receive payouts of 65-71% for options expiring in-the-money and even a 15% refund for those expiring out-of-the-money.
Take the below situation as an example of how a binary options trade can work:
Underlying asset – Nasdaq
Strike price – 2,164.460
Expiry time – 15:30
Investment – $1,000
Return – 71%
Expiry level – 2,167.20
Situation 1:
A Call option is purchased. At the expiry time of 15:30 the expiry level 2167.20 is above the strike price and therefore in-the-money. We pay the investor a $1,710 payout
Situation 2:
A Put option is purchased. At the expiry time of 15:30 the expiry level 2167.20 is above the strike price and therefore out-of-the-money. We pay the investor a refund of $150.
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Source by Eugene O Jameson