How do Binary Options Work
- Published: Friday, 16 January 2015 06:30
- Written by Stephan
Over recent years, a new form of trading, or ‘buying’, has started to become increasingly popular. With the number of ‘Binary Option Buying’ sites, appearing on the internet on an almost weekly basis it’s little wonder those with an interest in online trading, are beginning to take a closer look.
A word of warning for those considering turning to binary options: while some areas of binary option buying are regulated. Many online sites are not, consequently, should you pick a wrong one; there is always the risk of losing any pay out amount due. Use our Binary Options Broker List as a guide to find your Broker.
What exactly are Binary Options:
Binary options buying is becoming more popular due to the basic way in which it works. The outcome of any transaction is win, or lose. While the majority of buying is done on a cash basis, some sites allow the use of assets as collateral for buying purposes.
Whether binary options can be considered a form of trading, or whether it should be considered gambling, depends on one’s own standpoint. Binary options are often called ‘all or nothing’ options, ‘fixed return options’ or ‘digital options’. The option is to guess whether the price will go up, or down. Hence the term, binary options.
For example, your original stake is an amount laid down by the site. Let’s say you have to deposit 100EUR, for this theoretical option. A company’s share price stands at 50EUR, at mid-day. Your choice is to decide whether that share price will be higher as of 12.05 on the same day, or lower. The amount you win is predefined. If your choice is, it will be higher, and it is, you win. Should the price fall, the options site may return you a percentage of your investment. If the price remains at its original, the stake is generally returned.
Buying Binary Options:
Binary options can be brought for virtually any financial instruments such as, stocks, indices, commodities, and foreign exchange. The option can be brought on the share price going down, as well as up. Unlike market trading, once a binary option has been bought, the deal is sealed, and the buyer does not have the choice of selling the option on.
Many of the better Binary options Broker providing a free, real time guide, on how the process works to help with your first option purchase.