Definition of Binary Option and Trading Tips
>> Jul 21, 2012
Binary options trading guarantees fixed returns as there are only two possible outcomes at the end of the trade. A binary option is best described as a contract which gives the buyer right to buy an asset, at a fixed price, valid for a definite time period.
The items or assets, as they are called, could be any product, for example currencies, gold, commodities, indices or stocks and the purchasing price are known as the strike price. While purchasing an option, a buyer studies the present market situation and decides whether the price of the asset will rise or fall takes his decision accordingly and purchases the asset.
All the transactions must be completed within a stipulated time, for example a day, a week or month. The owner purchases a call option if he thinks that the price of the asset is going to rise at the time of closing. Or else he buys a put option if he thinks that the closing price of the asset will be less than the purchasing price.
Binary options trading is the most flexible form of share trading as the owner has the power to purchase an asset and sell it at his convenience- within the stipulated period- to extract the maximum profit.
The contract can either end in the money or out of the money, depending upon market conditions. If the contract ends in the money, then the trader receives 65-70% profit. If the contract ends out of the money, then the trader gets a 15% profit on his original investment.
For binary options to yield profit, it must move in the desired direction, otherwise the total investment is waste. Options trading is the most versatile and dynamic form of trading, as it offers you the advantage of being traded without the help of a broker.
