You may have heard about binary options a lot of times and wondered why everyone is investing money in this type of trading. Although there are a number of ways to invest money in the financial market, but binary option is something that has gained a lot of popularity in a short period of time. So, what are the attractions and benefits of this type of trading?
Binary options pay a fixed amount of money at a set time of expiry. If you want the investment to be positive for you, then your contract needs to end in your favor with the obligation intact. Although it may seem a bit complicated at first but it is quite easy once you understand how binary options work. When you enter in binary options contracts, you want the market to finish higher or lower than the price at which you agreed to enter the market. This scenario should happen at the expiry time. There are two types of binary options, namely Call and Put options. You buy the Call option if you believe the market will finish higher and you purchase Put option if you expect the market to finish lower.
If your prediction about certain asset price turns out to be true at the time of expiry of contract, you finish ‘in the money’ which means you make a profit from the trade. On the other hand, if the outcome is not what you expected, then you finish ‘out of the money’ and lose your investment. The final outcome is ‘at the money’ where the market finishes at the same level at which you entered. In this scenario, you don’t lose or gain in your investment. However, you can claim a refund of the price of the binary contract.
A great advantage of binary options is that you know how much profit you will make before you even enter the market. This is a great way for the new investors to learn this business and make profits at the same time. Moreover, new investors don’t have to know a great deal about the market and they just have to predict the state of the market at the end of the contract. If you take informed decisions in this trade, then you can make a lot of money. This is the beauty of binary options that attract new and old investors.
Another attractive feature of this type of trading is that it is carried out over short periods of time. The new investors don’t have to know the long term prospects of the asset price and most of the contracts only run for the matter of minutes before giving the outcome. You may wonder if you can have long term contracts in binary options. Yes, you can select the long term contracts too, but a big majority of people are interested in buying short term contracts so as to get better returns on their investment in the least possible time.
You can start trading options with low capital and open an account on a broker’s website easily. After opening the account, you can deposit the money and start trading on any of the assets that you prefer. Trading in binary options is very easy and you can learn more about this form of trading as you go.