A binary option is a financial option whereby a payoff will be a set amount of a particular asset, or nothing at all. This type of option is used by stock market traders and brokers. There are a couple of common binary options types, including a “cash or nothing” option and an “asset of nothing” option, as well as more specialized forms of binary options.
When you choose a binary option, you’ll bet on a price drop or gain within a set period of time. If your prediction is accurate, you’ll win your bet and earn money. If you prediction is wrong, you will lose money.
This type of option is one of the most popular choices for those who wish to begin trading in the stock market. Known as a good option for beginners who’ve spent some time boning up on stock market assets and patterns, the binary option trade will also be selected by more experienced traders who wish to use their stock market acumen in order to enjoy quick profits.
Binary options may be traded online these days. However, these types of options are also available through more conventional stock market trading avenues. Because only two results are possible with these types of options, they are known as “binary”. Basically, these are all of nothing stock trading options that pay something or nothing at all, depending on how each “bet” plays out. Therefore, binary options may be considered high risk trades that offer the potential to earn money (or lose money) quickly.
People who begin trading in binary options should be careful not to bet more than they can afford to lose. It’s smart to set a fixed amount of money for binary options and then stick to it.
“Cash or Nothing” Binary Options
When you choose a “cash or nothing” binary option, you’ll receive a fixed amount of money if the option runs out when the option expires “in the money”. This type of option rewards a trader for his or her successful prediction of a price rise or drop in the stock market.
Traders who use “cash or nothing” binary options will receive a set amount of cash, which is determined in advance of the trade, when the trade pans out. This sort of stock trading is based on a European model of stock trading, and it is a gamble (like all forms of binary options trades are).
“Asset or Nothing” Binary Options
When using an “asset or nothing” binary option, you’ll access a trading model that is the same as the “cash or nothing” option. However, there is one small difference, which is that the option price is fixed, rather than random. This form of binary option trading is less popular than the “cash or nothing” binary option.
“One Touch” Binary Options
This type of binary option is meant for stock market traders who are able to set an exact value when betting on a price drop or rise. In other words, the asset must arrive at a precise price in order to pay off for the trader. Those who trade in “one touch” binary options should be very aware of market patterns and conditions, which will require constant market analysis. Because this type of price bet requires an exact value, it’s probably not the best choice for binary option “newbies”.
“No Touch” Binary Options
In contrast to a “one touch” binary option, the “no touch” option doesn’t require a precise price value during a trade. Traders who choose this form of binary option will instead need to determine the value that the asset will not achieve, or “touch”, during a set time frame.
Now that you know more about binary option trades and how they work, you may want to participate in this type of stock market trading. The best way to do so nowadays is by setting up an account with a reputable online stock marketing trading platform.
While you will need to pay fees in order to access trades online, these Web-based platforms will allow you to access a range of stock market analysis materials, such as stock price charts and mathematical formulas (which are used for predictive purposes).
There are also a range of free online and offline resources that are designed to help binary options traders master the art of betting on price rises and drops.