Binary option platforms are trading forums, where binary Options can be traded among prospective buyers and sellers. However, before delving further into binary option platforms, let’s go back to the basics and see what binary Options really are and what all they mean to a trader.
What are Binary Options?
The realm of financial trading has become very complex and deep in nature. Plenty of financial innovations have crossed the markets in the past decades, Options being the most successful one. An option, in monetary terms, is a contract that gives the owner a right, not an obligation, to buy or sell an underlying asset when conditions go in favor of the option owner. Because of their flexibility, Options have become very popular among traders who like the feel and thrill of trading.
The depth of this field is highlighted by the fact that Options are not only a kind of financial derivatives, there is an entire array of the kinds of Options you can buy or sell. Apart from the most basic financial instruments, Binary Options have gained a lot of fame in recent years. Stemming from the literal definition of binary, these Options can end up in two ways, they either give the investor everything or they give him nothing. In more formal terminology, binary Options are securities that give a payoff equal to the value of an asset or give nothing at all.
One of the biggest differences between binary Options and other kinds of securities is that an investor knows the maximum benefit and maximum loss he can incur when he purchases a binary option. Therefore, the level of certainty offered by options trading goes up a notch with binary options.
The Essentials in Binary Option Trading
To understand the working of binary options, the primary determinants in option trading need to be kept in mind. Options are easy to trade because they represent physical assets but are not like assets at all. Therefore, while a land or a house may be hard to exchange, an Option is a piece of paper so trading it is easier.
One determinant in binary option trading is the time. The Option is valid for till a certain date, therefore, it needs to be used within the specified time period beyond which it expires. The payoff is the profit earned from the option after all costs inured are accounted for. This payoff is either the amount equal to an asset or nothing at all, in the case of binary options.
The two kinds of binary options are the cash-or-nothing Option and the asset-or-nothing option. In the cash-or-nothing option the payoff is either a fixed cash amount or nothing and in the asset-or-nothing option, the payoff is either the value of an asset-or nothing. Another relatively newer concept in binary Options is that of a “60 second binary option.” In a 60-second binary option, time is very crucial. This option works by making you bid on the direction of an asset’s price after a thorough analysis of its trend. Once done, if you are in-the money after 60 seconds, you have made a profit and vice versa. The main difference in 60 second and regular binary options is the time before expiration. While binary options offer minutes, hours or even days for you to ponder over the trends displayed graphically, 60 second options merely give you a minute to decide on which route to take and then wait for fate to make you successful.
Tips to Choose the Best Binary Option Platform
Binary or Digital Option trading gained real momentum in 2008. Even though, trading with these Options is serious business, the emergence of pseudo websites trying to lure buyers has doubled in the recent years. Most of these websites promise fake returns such as 75% or 80% returns in just a matter of minutes. Such fraudulent activities only make investors lose money even if they were in for some serious trading. Therefore, care must be taken when you chose a binary option platform to trade your option with potential investors. Some of the following tips may come in handy while you look for a platform worth trading on.
- Expert customer Service: Regardless of your expertise, there will be times when you need advice and support on decisions related to binary Options trading because in matters of money, everyone wants to be careful. Trade platforms that provide excellent customer support are the ones that will help you when you want more information regarding an option or need to know the basics of the trade.
- Overly expensive platforms: Some platforms have many hidden charges. They are too pricey and charge for even the deposit of money by an investor. Because binary trade is fast and may result in no gain at all, keeping costs low is an important determinant.
- Reasonable returns: Pick a platform that offers a reasonable return. The overly enthusiastic ones may be a scam but getting a reasonable return is the reason you bought an option in the first place. When platforms offer a wide range of assets to be traded, the chances of making a profit are higher, giving you more choice and flexibility in trading.
- Platforms with visuals: Ever seen the stock market trends on charts and graphs? These charts make way more sense than any amount of financial data ever could. If the online platform puts up regularly updated charts, graphs and Options trends, it will improve the analysis and decision making process at your end. The real time graphical display is of primary importance if you want to make a successful investment in binary options.
The arena of binary options trading is one full of risks. Even though, it is a relatively new field of trading, it has become more popular than any other financial security because of the convenience attached to it, which is part and parcel of it. If you have a nag for quick trading opportunities and want to try out your luck with financial derivatives, binary options are a good way to start.