Binary Options – Trading Simplified!
Binary Options – Trading Simplified!March 4, 2012
Binary options is really trading as simple as it comes. At first glance, the name “binary” gives the impression of something sophisticated or mathematical. Well, in reality this could not be farther from the truth, and most traders I know like to keep things as simple as possible, so keeping this in context the best way to view it would be to visualize a kind of trade with only two possible outcomes or scenarios known a “in the money” or “out of the money”.
Why is it So Easy?
Well, for starters, if you are an investor looking for a quick return on assets, you’re going to reach two conclusions very quickly.
Conclusion # 1: Contracts of this nature have almost zero complexity.
Conclusion # 2: The turnover is very fast, and the ROI is very high.
This means that the risk level is relatively high, but at the same time you stand to make more money a lot faster than what you would get if you invest in more traditional type securities or financial instruments.
Trading Simplified with Easy and Intuitive Win-Lose Outcomes
So this is the gist of it, if you believe commodity, stock, certain indices, or other assets will rise or fall before the end of the day you invest (this can be anywhere from as little as $50 or as much as $50,000). Place a fixed dollar amount down and buy a “call option” if you predict a certain asset will rise. Alternatively, if you predict a certain asset will fall, buy a “put option” (hence the term “binary”).
As opposed to other financial trading instruments or stock option, the expiry times in binary options are very flexible. Meaning you can place money on a direction with an expiration time of an hour, day, week, month, etc. The profit calculations are based on the Black-Scholes Valuation model which factors in formulas with pre-determined or fixed yields. The payouts are performed according to the trades that are put down and the direction of the predicted outcome.
This is probably the most important thing you should know about trading binary options online. If you predicted the direction of the price movement correctly, it doesn’t matter how much the price moves, only the direction (meaning up or down). Your ROI is not complicated by intricate factors or indicators such as share numbers or various types of difficult fractional computations performed by the brokers or banks. You will always invest a fixed sum of money and gain (or lose) a fixed yield depending on the outcome.
Higher Risk Assets Mean Higher ROI
When considering investing wisely, we have to look at the risks involved in binary options trading. So in a nutshell, when you earn a high yield for landing a trade “in the money”, you need to consider the relatively high risk involved if you put down a trade that expires “out of the money”. This is goes to the core of the dilemma of how and if to invest, and is the most crucial deciding factor when trading binary options. Now, the binary options sites understand this, so they have to compensate with high yields due to the high level of risk. In most trading platforms you will see an 81% profit advertised on the home page.
To Sum Up
Binary options trading is a relatively high- risk type of trading is simplified if you’re a a trader looking to make a quick return on your investment with a hi yield or ROI.