Binary Options A Detailed Description

Binary trading or binary options is a classic way of earning money

. This type of a trading has different shades, different result outcomes and different views towards it. Binary option is a day trading option. This is based on the principle of all or nothing. Binary option is completely different from traditional day trading. To understand binary options, one has to understand what traditional option is and how option binary differs from them.

In a traditional day trading system, a person can buy or sell company shares depending on how NASDAQ is performing. In this case, a person owns the company shares and has the free will to sell the shares or hold it depending on NASDAQ. But in a binary option or options binary, whatever one may call it, there is a fixed amount which is traded meaning won or lost. Binary option is more like gambling. A person either wins it all or loses it all. Thus the name all-or-nothing comes from. Here a person has the option to earn a fixed return which is known is fixed return options (FRO).

That is to say a person while trading knows what he would gain if his prediction is correct or what he will lose if he predicts wrong. A trader while playing a binary option has the call option or the put option. That is to say, he has to predict if the share would increase or it would go down. In case, a trader or as buyer thinks that the share market will close above the strike rate, he will buy a call option. In case, he believes the opposite that is to say, the share market would close below to strike rate, he will have to buy a put option. Thus a trader has a fixed income either losing or winning the deal. This is why this type of trading is called a binary option, as in this trading process, it is either this or that. This is more like gambling and luck plays a part in it. For example, a trader who believes that the market would close at a point more than the strike rate and puts in his money into it. But at the end of the day, or the expiry time, if the strike rate goes above as the trader had predicted, he wins the money for which he had traded. Thus this has a fixed income as the trader knows how much exactly he is going to gain or lose.

by: sachin garg

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