5 Advantages of Binary Options

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Binary options, digital options or all or nothing options are a relatively new type of investment instrument which is available for traders from mid-2008. Also known as fixed return options (ORF), have gained increasing popularity due to the relative simplicity of its operation, even for those traders with little or no previous experience in the market. These options are classified as exotic options, since although its operation is simple, the calculations behind the pricing are complex.

 
Besides this, binary options trading is based on a variety of underlying instruments such as currency pairs, stock indices, stocks, commodities and others. In this way the trader can covers several markets with a single financial derivative.

With this type of option the trader does not transacting directly with the underlying instruments, only speculate on the price of these, ie to predict whether it will go up or down. Therefore there are only two possible outcomes (hence the name), is that the price ends above or below the entry price after the expiry of the period of the option.

 

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Fig. Trading binary option with BDSwiss

 

Thus, if the trader predicted that the price will go up and end of the option period in fact the case (even for 1 cent), it is said that the option ends “In The Money”, which means that operation was winning. When this occurs, the trader gets a fixed gain which depends on the underlying asset and the period of contract and can be from 70% to 85% of the amount invested. For example, if I invest $ 1000 in a binary option and the final success in my prediction and the option ends “In The Money”, my profit will be $ 700 to $ 850.

If the trader is wrong in his prediction of the market, it is said that the option is “Out The Money” and thus lose the amount invested, but depending on the broker he can recover an amount of 10% to 15%.

In most cases, binary options have a duration of 1 hour, however there are also options of 1 day, 1 week and 1 month.

Advantages of trading with binary options

They provide a controlled risk: The percentage of potential earnings is known from the beginning as well as how much can be lost on each trade, which facilitates monetary management.
Simplicity in operation: The operations with binary options can not be simpler, the trader must only determine if the price of an asset will rise or fall.
Attractive performance: The potential for profit with the binary options is quite high with yields of 70% to 85%. This is compounded by the fact that profits are awarded if the price has moved only one point in our favor.
 Hedging: Binary options can be used to hedge positions in other instruments. In this way we can use them to reduce or eliminate losses from transactions with currency pairs for example.
Contracts are issued at any time: The contracts with digital options are issued during almost all the day, which gives the trader the opportunity to trade at different times. All have an expiration date came and constantly presents new opportunities for operators.

 

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