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Binary-Options-Are-Simple-Trading-Instruments-Whic7
 

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    Binary-Options-Are-Simple-Trading-Instruments-Whic7 Binary-Options-Are-Simple-Trading-Instruments-Whic7 Document Transcript

    • Binary options are simple trading instruments which generally pay either a high, fixed returnor nothing at all. Hence the "binary". There can be only two possible outcomes to a trade: win or lose. For these reasons binary (or digital) options are also often referred to as "all-or-nothing" options. And this is mostly anaccurate description of the situation but doesnt quite tell the whole story. But first a little more on this relatively little-known financial instrument.1 Minute Options
    • Binary options, like traditional options, are available on a variety of underlyingassets With stocks, indices, commodities and currencies being the mostpopular assets on which to base trades However, unlike traditional optionsbinaries pay out a fixed, known return which isnt dependent at all on how far"in-the-money" the option is
    • If the asset you placed a call option order on is higher than the strike price byso much as one pip/tick then you are paid out the same high returns as if itfinished in the money by 100 points Lets look at a short example shall we?Keeping it simple well use the S&P 500 in our example
    • Lets assume we are bullish on this index overall, and specifically over the nextweek (though it could be month, day, hour, or even less in some cases) Weopen a binary call option on the S&P500 for $1000, expiring in one week, andoffering a return of 78%
    • Fast forward a week and the S&P, after both ups and downs, finishes just 1point above the price we bought it at a week ago Well, in this case we wouldbe paid out $1,780 on this successful trade
    • 1 Minute Options But what if we had been wrong? Well in that case we wouldbe returned nothing in most instances However, as hinted at earlier this isntalways the case
    • A few select binary options brokers actually offer significant returns, up to15%, on losing trades A structure like this can be far better for those new tobinary options trading or the more risk averse than the standard structurewhere nothing is returned on losing trades
    • The most popular broker offering this structure of returns is AnyoptionAnyoption offers a flat 15% return on all losing trades and returns from 61-71%on winning trades
    • There is a trade-off involved You sacrifice some potential returns on winningtrades in exchange for that security of a 15% return on your losing trades
    • For the more risk tolerant or experienced binary options trader it may not bethe best choice but for the beginner or more risk averse choosing a broker whooffers some returns on losing trades may be something to consider
    • 1 Minute Options