Binary Options Trading

Binary options trading is a very exciting potentially high-risk high reward kind of trading options

. One of the draws to binary option trading is within the time that it takes most contract options to expire usually one hour, you possibly can make an amazing roi. Exciting for some but could be too risky for others given the different types of personalities of investors. Nevertheless if you are a conservative or a risk taker binary option trading may be exciting and lucrative.

Before you find out how to trade binary options you have to first have an understanding of exactly what a binary option is and just how it works. Simply put a binary option is when a trader purchases a contract on an underlying asset and tries to predict whether the assets value increase or decrease over the life of the contract. If the value of the asset increases at the end of the contract you will be considered in-the-money and if the value has decreased at the end of the contract you will be considered out-of-the money. And just for the record I know that the phrase in-the-money is far more attractive to you and is fairly self-explanatory.

Here for example is how it may work. Let's say for the sake of this example that you're a web-based trader. You would go to one of the numerous binary options brokers websites and select an asset that you are interested in. You would then find the contract on that particular asset, purchase either a call contract if you think it is going to end higher or a put contract if you feel it will end lower. Most of binary options have an initial starting length of an hour. You can purchase option contracts generally as much as 5-15 minutes before they expire however the majority start at 1 hour in length. Within that one hour time span your asset will likely fluctuate up and down in value (price) but this has no relevance on whether you end up in the money or out of the money. The only thing that matters is the actual value of the asset on the expiration of the Contract.

When your contract matures or expires in case you have selected the right option you'll be considered in the money. Most ROI's (Return on investment) for binary options range from 150% up to 185% of the initial investment. Here's an example for you. Let's say you purchased a call contract for $500 on a new hot tech company currently at $85 per share with a one-hour maturity date along with a 160% payout. If at the expiration of that contract this new hot company was at $86 you would be in the money and would get a return of $800. That's a $300 return on your investment in a one-hour span. Can you see how this can excite your everyday trader? Obviously there is risk to every investment and you could have just as easily finished out of the money with no return on investment and a majority of your initial investment would be lost. You must due your research in order to make educated investment decisions.

by: darr46oera

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