For a lot of years binary options couldn’t be traded on their own, even though they were available as part of other platforms. Everything changed in 2008 when binary options were made available as a stand-alone market by the Chicago Boards of Exchange. Then North America followed with decisions made by NADEX (North American Derivatives Exchange). Nowadays that internet is accessible to a large number of people trading binary options has become even more popular. Because they’ve been included in the major exchanges they have become an important part of the entire exchange market. Therefore they are subject to a lot of governmental regulations.
The basic premise binary options market is for investors who predict price changes of an underlying asset. Traders choose an asset available on the broker’s platform and they make a prediction about which way the price is going to move. They are buying the contract of the asset though and not the asset itself. The contract length can be from one hour to a month, but they tend to expire in a short time frame such as an hour or two. To make correct predictions about the price the trader has to observe current events worldwide and market changes and anything that could influence the rise or fall of the price of the asset.
Binary options are traded on an internet based platform. This lets traders to buy or sell the assets from any location in the world provided they have access to internet. Most brokers don’t require a software download so just a speedy connection is enough. Everything takes place online, including withdrawing money. All these things simplify binary trading even further.
The process of binary options trading starts with creating an online account with a chosen broker and then depositing money on that account. Some brokers require a certain minimum amount to be deposited and some don’t so it’s all about finding the best broker for you. Some brokers have a demo account available so that beginners could learn how trading actually works.
Simplicity of trading, limited risks and fixed returns are reasons why binary options are so popular. Before completing a transaction the trader knows exactly how much they’ll profit if they make the right prediction about the changes in the market; and they also know the exact loss if the prediction is incorrect. Like with any financial business, there are risks involved, but the return from investments in binary options is very good.
To buy a contract on an asset, a trader has to choose an underlying asset that is available through their chosen broker. They will either buy the put or call option depending which way they predict the price to move. This amount is called the strike price. This is the number that will be taken into consideration when determining whether the price was above or below at the time of contract expiry. If the traders predicts right, he is said to be in-the-money and he will make a profit, if he chooses wrongly, he is considered to be out-of-the-money and he loses the initial investment.