Introduction and Overview of Binary Options Trading
Are Binary Options Right for You?
If you're looking for a basic, easy to understand method of trading options, you should consider binary options trading. In fact, they are so basic and so easy that Jon Najarian, of OptionMonster and CNBC fame, referred to binary options as, "options with training wheels."
Binary option trading is growing in popularity among traders because of their simplicity. A trader only needs to worry about the underlying security finishing in the money, or out. In other words, if you are able to predict the direction of a given security over a certain period of time, such as an hour, a day, or a week, you will make money with binary options. You do not need to worry about the “option Greeks”, implied volatility, or other traditional options pricing nuances in order to be successful. You also don’t need to worry about learning how to create multi-leg options trades such as butterflies, condors, calendar spreads, etc. You can be quite successful just buying calls and puts based upon whether you think the underlying stock is going to move up or down in the short term.
Binary options also cover a wide range of underlying securities, including individual stocks, indices, commodities and even currencies. So, regardless of what type of securities you choose to follow, you can make money by predicting the direction in price movement. Another advantage they have is binaries are issued and settled on a continuous basis, so you can make very short-term plays. If you think that a certain stock is going to move up in the next hour, you can buy a binary call option that expires in one hour. If the stock is in the money by even just $.01, the option pays off. The great thing is, even though you only owned for an hour and it barely finished in the money, your pay out can be anywhere 50% to 100%.
The other big benefit of binary options is the low amount of capital needed to start trading. Some binary options brokers will allow you to open an account with as little as $100, and place trades as small as $30.
Binary option trading is perfect for those who:
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Are new to options trading and want an easy way to get started |
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Prefer just buying puts and calls to complex options strategies |
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Are looking for a very short term trade, such as an hour or a day |
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Don't want to learn the complexities of options pricing or trading strategies |
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Want to trade currencies or commodities without putting much capital at risk |
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Want to trade with smaller dollar amounts |
While binary options are considered "exotic options", they are incredibly easy to understand, and binary options trading can be very profitable, even for a novice trader.
If you're going to trade binary options there are a lot of brokers to choose from. However, we feel the Global Option is by far the best one.
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