In order to set forth a trading strategy for binary options, traders need to be aware of what a binary option is, and how the whole market works.
A binary option is a contract. This contracted is very simple, asking a straightforward question of whether or not a trader (buyer or seller) believes that the commodity or stock the contract is centered on will reach a certain point (monetarily speaking) by the end of the market’s day.
If the individual feels that the option will reach the specified dollar amount by the close of the market, they say yes with a buy in of the contract. If they believe that the option will not reach the specified dollar amount, they either sell the option if they already own it, or do not buy it.
Benefits of Binary Options
The biggest benefit to engaging in binary options is that it does not require a ton of money for the initial investment. Investors can buy into a contract for $100 dollars or less. This allows investors with little money to take their chance in the markets without losing a ton of money.
Another major benefit is the probability of loss. With stocks, one can lose a substantial amount of money. Binary options markets will only incur a loss up to the dollar amount that was invested. Therefore, the only risk is the money used to buy the binary options contract.
Always An Open Market
Stocks and bonds tend to have closed markets. If the market is showing no progress or gain, stocks will cease sales and buy outs in those areas. With binary options, the investor can buy in volatile and flat markets. Simply set forth a contract for the option that is desired, pay the buy in price, and one is good to go.
What is more is that the open markets can happen multiple times a day, making it possible to engage in numerous transactions over the course of a trading day. The expiration on the binary options contract can expire in twenty minutes, or even a week. Set the mandates for the contract as the individual trader feels comfortable.
When using the options contract to make profits, the trader has a few options to consider. The first is the set time limit until the contract is settled. This can be for a day, week, or other specified period of time. If the contract terms are met, the investor will gain the 100% profit from the contract. If the specified monetary terms are not fulfilled, then the investor will lose their investment with a 0% gain.
Another way in which the individual can make a profit with a binary options contract is an early sell off of the contract., This option allows the trader to sell to another trader at cost, or at a profit to them. This will ensure the trader that they will at least break even with no substantial loss on their initial investment.