What is Binary option?
Legalized in 2008, Binary Options Trading is one of the easiest online trading where predicting the trading nature of an asset is the only key to making money. Unlike Forex, Binary Options Trading can be done by even a novice trader as in this relatively new trading system a trader has to simply select an asset, make a bet on Put or Call and then wait for the expiry time of the bet.
Before one starts trading it is important to understand what Binary Trading is all about and the basic terms involved in it. In Binary Trading Options, you select an asset and bet on Call or Put and either win or lose the bet. Put or Call is where a lot of trading depends:
Call: Call is when a bet ends with currency or asset price going higher than the price at the time of bet. If the price of Dollar/Euro is 0.7346 at the time of bet and you opt for “Call”, you are saying that by the time of expiry of bet the price will go higher than 0.7346.
Put: Put, on the other hand, is when a bet ends with currency or asset price going lower than the price at the time of bet. If the price of Dollar/Euro is 0.7346 at the time of bet and you opt for “Put”, you are saying that by the time of expiry of bet the price will fall down and go lower than the 0.7346.
Two main kinds of Binary Options Trading are “Asset or Nothing” and “Cash or Nothing”, where a trader gets either a small unit of asset or money when, and if, the option expires in the money.
When in a Call a bet ends with currency price going higher than the price at the time of bet, it is called option “Expiring in the money”, where the trader wins. But if the currency price falls down than the predicted price it is called “Expiring out of the money” and the bet is lost. Similarly, in a Put bet if the currency prices goes lower than the price at the time of the bet it is called option “Expiring in the money” and if the currency prices goes higher than the current price it is called “Expiring out of the money”.
The trading happens between online traders and a trader. The most unique part of Binary Options trading is that there is more than one form of trading in it and more than one asset to choose from.
What makes Binary Options market more feasible and friendly for a trader is the fact that there is more than one category to choose from. From Stocks, Commodities, Currencies to Indices there are options a trader can opt for based on his/her understanding of the market and finance. If a trader has a good grasp of company stocks then he/she can bet on Stock and if a trader is only aware of how currencies go up and down, then he/she can place a bet on currency pairs available on the broker site.
Commodities: Some of major commodity assets traded in Binary Options are agricultural products, metals and crude oil.
Stocks: Stock trading consists of betting on stocks for banks or petroleum, automobile and software companies.
Currencies: Currency trading consists of betting on currency pairs like USD/GBP, USD/JPY, EUR/GBP etc.
Indices: Trading Indices is basically betting on the stock exchange of countries, such as Bombay Stock Exchange, US Stock Exchange etc.
Unlike Forex, Binary Options has so many trading types to choose from which allows a trader to get odds in their favor. Trader can bet on currencies or any other asset as offered by the brokers and choose from quick one minute or one hour trading to 24 hours of trading. The wide trading options makes Binary Trading Options popular among experts who have enough knowledge to predict the short term trading scale of these assets and among new players who aren’t skilled enough to trade on day to day financial world of Forex.