Binary options trading is becoming increasingly popular in financial markets. According to Investopedia with this option, „the payoff is structured to be either a fixed amount of compensation if the option expires in the money, or nothing at all if the option expires out of the money.“ The holder of the binary does not have the right to buy or sell the underlying asset.
Binary options, also called asset-or-nothing options are traded in a simple process in which you only need to guess whether something will or will not happen, which is one of the biggest advantages of trading binary options. The trade requires you to make a simple YES or NO proposition. You should buy the binary if you think that the strike price of the binary will be higher than the price of the underlying asset at the time the binary expires. If you don’t think it will happen, you simply don’t buy or sell the binary.
However, trading binary options is still riskier than trading regular options. On the other hand, that is why there is also a possibility of huge returns: usually between 60% and 90% of the investment.
Another advantage is that it is a very short-term trade, allowing for fast returns. Although this can be different depending on the underlying assets, expiry times for binary option are usually one hour or less. Therefore, you can trade more options per day and thus have the chance to make more profit. A great number of the daily binary option traders buy and sell 15 or 30-minute options. And if you really want something akin to gambling experience, you can try the incredibly thrilling 60-second options.
Low cost is another good side of binary options. The opportunity for binary option traders to exchange small amounts at a time makes them very convenient for online trade. Many brokers will let you make minimum transactions from as little as $1, which means that you can trade as much or as little as you want. Beginners are advised to invest small amounts until they get to grips with how the trade works and to bet only the amount that they are willing or can afford to lose. Also, make sure you are using a reliable trading platform, because binary options trade is mostly unregulated.
Last but not least, excitement is an important factor when choosing binary options trade. This kind of trade is not for those who like to play it safe. Because it is fast-paced and inherently unpredictable, investors will discover that, even though there is a high level of risk, binary options offer fresh and exciting trading opportunity to use once in a while.