Binary Options Simple and Explained

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Binary options are extremely useful trading instruments that are quite popular with investors of all skill levels. As their name suggests, the main principle behind a binary position is that the trader will assume that an underlying asset will either increase or decrease in value within a set period of time (hence the term binary).

As a result, he or she will either enjoy an "in-the-money" position or there will be no profit gained whatsoever. Due to this feature, such options can be quite popular in comparison to a stance that will require an asset to grow over time in order to earn a substantial yield. Let us take a look at some primary principles behind binary options.

Binary Options - Calls and Puts

A "call" is a contract between the buyer and the seller which guarantees the buyer the right to buy an asset (such as oil futures) at a set price for a specific period of time. In the same respect, the seller is obliged to sell this asset to the buyer if the contractual conditions are met.

A "put" is similar in principle and yet in this case, the trader has the right to SELL this asset within a certain period of time and price. The seller will then purchase this asset back. From both the call and the put positions, it therefore becomes clear that the movement of the asset (in either direction) is critical.

Which Assets can be Traded as Binary Options?

A wide variety of assets can be enjoyed across a spectrum of different sectors. The four main categories are stocks, indices, commodities and Forex positions.

Stocks are simply assets guaranteed by a company or corporation. We will once again note that the trader will profit when he or she determines their direction of movement as opposed to a specific price in the future.

Indices are considered to be more stable, as they do not rely upon one particular stock or asset; rather an entire group. While an index may not be affected by discrete fluctuations, their movements can be more difficult to determine.

Commodities represent assets such as gold, silver, coffee or platinum. As the prices here are influenced by real-world events, their movements can be slightly easier to track.

Currency pairs (Forex) are another binary position. The value of one major currency against another represents the basic principle behind Forex trades. Factors such as interest rates and global economic conditions are more observable, so Forex binary trades can be another popular choice.

Where Can I Learn How to Trade?

There are several important variables to take into account before entering into this exciting market. While there are numerous online resources to employ, some are better than others. bestbinarybrokers.org will provide novices and professionals alike with a wealth of information including the mechanics behind binary options, expert advice and proven strategies (as well as analysing the top brokers). The end result is a well-rounded approach which can help to secure a tidy sum of money with time and patience.