In this quick guide we will give you a short explanation of the term binary options, also known as “Digital Options”, “all-or-nothing options” or “Fixed Return Options” (FROs). Later on we will describe the risks surrounding binary options and discuss on the reasons why to choose binary options.
What are binary options?
Binary options are in all it’s simplicity just a prediction of how the price of a share, index, currency or commodity will evolve over a given period. Binary options are a simple web-based form of investment where the results are compared with conventional financial trading and are shown immediately.
It is important to understand that the trader never, ever owns the assets with binary options but merely tries to predict which way the price of the asset is evolving. Therefore the price of the asset alone isn’t an important figure for the trader – it’s whether the prediction was correct or not.
Binary options can be considered as a financial tool with only 2 possible outcomes. The trader estimates weather the price of a share will rise or fall in a given time period and the trade can only have two outcomes – true or false.
How binary options work?
Binary options offer a fixed contract on a financial asset. Options have a predetermined profit and a contract running over a determined time period, that can stretch out from minutes to days and even weeks.
Call or Put Options
A “Call option” gives the trader a profit when the asset’s price rises compared to it’s price when you made the contract. “Put options” gives the trader a profit when the asset’s price fall under the buying price. If the option runs out at exactly the same amount as when you bought the contract, the investment will be refunded to the investor.
What are the risks involved in binary options?
There is always a presence of risk involved when speculating with financial trades – binary options are not an exception. However the risks involved with binary options are transparent since the amount you can lose is known beforehand and the trader can never lose more than the original investment, no matter how much a price of the asset drops or rises.
Why to choose binary options?
Because of the simplicity and the ease of access. If you believe the price of dollar is on the way up, your analyzis of the currency market predicts so or if you simply have a gut feeling about it – just quickly choose “Call” in order to make fast profits.
How hard can it be? Believe me, it can be hard. However the feeling from successes is extremely satisfying. So don’t skip your homework and you can quickly succeed with binary options.