Getting to Know Binary Options
Binary options are different from stocks, bonds and mutual funds; even so, they are quite simple to understand. Instead of investing in a particular company (i.e. Microsoft, Google, Facebook, Exxon Mobile, etc.) a person who invests in binary options is essentially betting on price fluctuations in the price of particular options. Those who bet correctly will win a predetermined sum of money; those who take the wrong position will lose their entire investment.
Binary option investors can bet that the value of a certain investment will either go up or down. What is more, they can also set a time range for the stock to reach a certain high or low; this time range could be as short as a single minute or as long as a full day or even an entire week.
For instance, a binary options investor may look at a company stock that live trading signals is currently valued at $20 per share and bet $100 that the price will rise to $20.50 or higher by the end of the day. If the investor is right, he or she will earn a predetermined sum of money. If the investor is wrong, he or she will lose the full $100 investment.
Gains and losses are not determined by how “right” or “wrong” an investor may be; this means that the investor will earn the same amount of money whether the stock in question is valued at $20.51 or $22.00. Conversely, an investor who bets wrongly will lose money regardless of whether the bet was off by a single cent or a few dollars.
Types of Binary Options
Binary options can be traded inside the United States or on an international level. Alternatively, some investors may opt to invest in both national and international options. International binary options are officially categorized as being “exotic options” by the United States Securities and Exchange Commission.
There are various types of U.S.-based and international binary options. Following is an overview of these various types and how they work.
Digital options are the simplest and most popular form of binary options. They are frequently called up/down options or call/put options simply because an investor need only bet on whether the options will rise above or fall below the active trading price within a certain time period. This time period can be as short as fifteen minutes or as long as a whole day. At the end of the time period, an investor will receive an email stating the current price of the options in question.
There are three types of touch options. These are touch, no touch and double touch.
An investor who bets on touch binary options is betting that the value of a certain option will rise up to or above a certain amount. Investing in no touch options simply means that the investor is betting that the value of a certain investment will fall to a certain level. A person who bets on double touch options places two different bets on two different positions. Such an investor wins money if either of these positions is reached.
All types of touch options are purchased over the weekend and then traded during the week. The investor then has a number of chances throughout the week to win (or lose) money based on the closing position of a particular investment at the end of the trading day.
Sixty Second Binary Options
Sixty second binary options are essentially the same as digital options. The only difference is that an investor is betting that a particular stock will rise or fall in value within a sixty-second time period. Once again, investors win or lose money based on the accuracy of the call, regardless of how much money was gained or lost.
As the name implies, investing in boundary options involves betting that a particular investment will stay within a particular price range for a particular amount of time. This price range can be narrow (i.e. between $17.00 and $17.50) or broad (i.e. $15.00 and $20.00). An investor wins money if the options do indeed stay within the predetermined price range for the predetermined period of time.
Alternatively, an investor may bet that the options will move outside a predetermined boundary within a set period of time. The investor will then win money if the options break out of the limits, regardless of whether the options have risen or fallen in value.
The Binary META trading method is a bit more complex than other forms of binary trading. Even so, it is ideal in some ways because it offers investors more options than simply up and down betting. With Binary META trading, an investor is able to not only bet on the future value of a particular investment but also double the bet mid-way through the day. Alternatively, an investor can sell early if he or she sees that there is the possibility of the bet being wrong.
How are Binary Options Traded?
There are a fair few websites that offer binary trading options. However, it is important for investors to note that many of these websites are fraudulent in nature. The only safe websites for trading binary options are those that are supervised by the Securities and Exchange Commission (SEC). These include the Nadex and Chicago Board Options Exchange (CBOE). An investor who is interested in purchasing foreign binary options should ensure that the broker he or she is working with is registered with the SEC or Commodities Futures Trading Commission (CFTC). Those who are not registered with either of these bodies are not legally allowed to work with U.S.-based binary option investors.