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Learn To Trade Binary Options
An interesting and potentially very profitable type of online options trading is the binary option.
Learn to trade binary options and you gain if you correctly anticipate the market lose no more than the price of the option if your analysis turns out to be incorrect.
Learn to trade binary options and not only is trading somewhat simpler but it can be a lot more profitable as well.
But, before looking at binary options, just what are options in general?
The Options Market
An options market is a place in which a buyer and a seller agree to a contract for a future transaction at a set price.
In the options market of today trading is typically online and happens with the support of a clearing house that takes away the risk on non-compliance.
Options are bought and sold on stocks, commodities futures, and currencies. The two basic tools of options trading are calls and puts.
Buying a call gives the buyer the right to purchase the equity in question at a set price, called the contract or strike price, no matter how much higher the price may go.
A put gives the buyer the right to sell the equity in question at the strike price.
In each case the buyer of the option is under no obligation to execute the contract and will only do so if profitable.
Sellers of calls and puts are obligated to fulfill the contract if called upon to do so.
Over the long run selling options is more profitable than buying them.
But, one bad trade can be very expensive, so most selling (writing) of options is done by large institutional investors with very deep pockets.
How to trade stock options can be with binaries as well as regular trading.
A profitable option trade in regular options trading yields the difference between the strike price and the current price of the equity.
This is different from binary options and it is important to learn to trade binary options with this simple fact in mind.
Learn to Trade Binary Options
Binary options are of two sorts.
One is called “cash or nothing” and the other is called “asset or nothing.”
An “in the money “ option in regular options trading is an options contract that has some value, even if that value is one cent.
An “in the money” binary options contract is one that is worth a fixed amount of money or the value of the underlying equity.
There is no in between value.
Naïve traders may look at binary options and see the “all or nothing” aspect of binaries as a simple way to trade.
Actually, binaries are complex in that the difference between making a profit and walking away with a hard learned lesson may be one cent in the value of the equity on a given day at a given time.
Traders who learn to trade binary options must know how to do both fundamental and technical analysis of the underlying equity on which the options contract is based.