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Binary Options Trading

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Trading with Binary Options

A Binary Option can be defined as a type of exotic financial option where the payment is either some fixed amount of some asset or nothing at all. Actually, the two main and most popular types of binary options are the cash-or-nothing binary option and the asset-or-nothing binary option, that can be traded in most Binary Option brokers. The cash-or-nothing binary option pays some fixed amount of money to the investor if the option expires in-the-money (this means that the trader was correct in his prediction) while the asset-or-nothing binary option pays the value of the underlying security. In this case, these options are binary in nature because there are only two possible outcomes of every trade. These options are also called all-or-nothing options, digital options (this name is more common in the Forex/interest rate markets), and Fixed Return Options  or FROs.

To have a better understanding of how binary options work, let’s see an example. First, let´s imagine that a trader acquire a binary cash-or-nothing call option based on an instrument like a stock which have a price of $100. In this case this option has a binary payoff of $1000. Then, if at the future maturity date (the date when the contract is over and the option is executed), the stock is trading above $100 (the option is In The Money), the trader receive $1000. But if the stock is trading below $100 (the option is Out The Money), nothing is received and the trader will lose between 85%-100% of the investment.
As we seen with this example, binary options can produced high returns but also can cause high losses if the traders is not careful. You can learn more about binary options trading through a binary options practice account offered by some brokers.

According to the popular Black-Scholes model, the value of a binary option can be expressed in terms of the accumulative normal distribution function, so the trader have an objetive method to analyze the behaviour of this financial product for trading purposes. Off course there are other models to analyze binary options but are more complex.

Like other types of Options, binary options are getting increasingly popular among investors due to the following advantages:
  • CHEAPER IN COMPARISON WITH OTHER INSTRUMENTS: Binary Options trading is cheaper compared with other financial instruments and traditional trading options like shares or commodities for example.
  • FAST AND HIGH RETURNS: Binary Options offer a fast and high income compared with other investment options. Regular binary options operate in intervals of minutes and hours. In this way the trader can obtain a return from 65% to 85% (and even more) of the contract inversion for trades with a duration of one hour or less. However, the trader also has the option to trade with binary options with a maturity of 1 week, 1 month or even more (these binary options offers higher returns).
  • TRADING SIMPLICITY: This type of financial product provides a great way for inexperienced traders to start trading and learn about the financial markets thanks to its simplicity. In this new and intuitive type of trading, traders predict the direction of the market. Binary options also have a much shorter shelf-life than futures trading or stocks for example. The investors make predictions on the direction of the market within a day, and sometimes within an hour so, the person no need a deep knowledge of the market. The trader just have to decide if the market is going up or down and buy a call option or a put option.
  • EASY RISK MANAGEMENT: With binary options traders know ahead of time the amount of the potential earnings and losses, so they can manage their risk more easily. Generally, the risk is lower in comparison with more traditional trading options, therefore the trader can obtain large potential gains with minimal risk. In addition, some binary options brokers gives investors an additional benefit by providing a protection rate up to 15%, which means that a trader cannot lose more than 85% of his investment in a trade.
  • LESS REGULATION: The regulations for this type of trading are less strict than other conventional forms of trading. Actually, the Binary options trading is available to any investor with Internet access, and the options are traded round-the-clock. If companies or brokers related with Binary Options trading find regulations that interfere with business dealings, they can easily move offshore or to another location with less regulation like the tax heavens.
  • RANGE OF MARKETS FOR TRADING: Currently the binary options brokers offers a wide range of different underlying assets to trade with binary options – from financial instruments (shares, indices, commodities, Forex, etc) to sports and the weather. The range of markets and financial instruments within binary options is increasing everyday which helps to increase the popularity of this trading instrument among investors.

In general, all financial options, including binary options, are classified in the following basic types (according to the trading style):

  1. American Style: In this trading style the options can be exercised at any moment before the expiration of the option, which allows to ensures the earnings of the trade.
  2. European Style: On the contrary, in this trading style the options can be exercised only after the expiration time.

Also, binary options are classified as a type of exotic financial option as it operates differently from traditional options. In recent years the financial markets has seen the development of many new types of options which vary substantially in their trading style. One of the most popular types of exotic options are binary options due to the many advantages that were described previously. For this reason, during the last years has been a tremendous surge of brokers that specialize in binary options trading.

Types of Binary Options

Basically, we can define the following types of Binary Options:

  • Cash or Nothing Above/Below Binary Options (It is the most common type of binary option)
  • Asset of Nothing Above/Below Binary Options
  • One Touch Binary Options
  • No Touch Binary Options
  • Double One Touch Binary Options
  • Double No Touch Binary Options

 

These are the basic types of binary options offered by most brokers specialized in this financial product.There is also a variation of Above/Below (Cash or Nothing) binary options which has an expiry period of just 60 seconds. These options are ideal for traders who trade based on the micro movements of the market for quick profits. More information about 60 seconds binary options through the following link:

 

More information about the different types of binary options can be obtained in the following article:

 

Currently, many brokers among which we can include some Forex Brokers offer Binary Options among its various investment opportunities for their clients. In fact, some Forex Brokers allow their clients to trade with Forex and Binary Options at the same time (usually through different trading platforms) so that they can diversify their investments. Due to the simplicity of binary options, many investors and traders are investing their money in this financial derivative as an interesting alternative to make money in the financial markets.

The following is a list of the main 10 brokers that offer the Binary Options trading:

List of Binary Options Brokers

Broker Type of Broker Types of options Broker Review
OptionTrade Binary Options with OptionTrade Binary options broker $100 Review
Anyoption Anyoptions Binary options broker Binary options broker $100 Review
Optionfair Binary Options with Optionfair Binary options broker $200 Review

TR Binary Options

Binary options broker TR Binary Options
Binary options broker $200 Review
HyOptions
binary options with HytOptions
Binary options broker $250 Review
Banc De BinaryBroker Opciones Binarias Banc De Binary Binary options broker

(regulated broker)

$500 Review
Winoptions Binary Options broker Winoptions Binary options broker $100 Review
OptionBit Binary Options Broker Binary options broker $100 Review
24option 24option Binary Options Broker Binary options broker $250 Review
Bloombex Options

Binary options broker $200 Review

 

Through the following link you can have access to a complete list of brokers specialized in binary options trading:

-Binary Options Brokers List

Binary Options Brokers Affiliate Programs

Due to the high level of competence in the field of Binary Options Brokers, these companies have been forced to seek new ways to attract new customers. One of the most effective methods for acquiring new customers are the Affiliate Programs. These programs developed by some Brokers dedicated to Binary Options trading, allow their affiliates to earn large sums of money promoting the services of these companies.

In other words, the affiliate programs of Binary Options Brokers pay their members to get new customers (traders) that open a trading account and fund it to trade  with  this financial instrument. Thanks to the marketing tools and the payment plans available to the affiliates, these affiliate programs are an excellent option to monetize web sites and blogs with topics related to Forex and the market in general, for example. Also an affiliate without a website can earn money with an Affiliate Program of this type.

If you want more detailed information on the subject only have to use the following link:

-List of Binary Options Brokers Affiliate Program

 

 

IQOption regulated broker