Perhaps one of the greatest things about dealing in the market (stock, shares, currency or otherwise) is the fact that they are replete with choices and instruments which have the potential of doubling the income that would be earned by following more conventional methods. While seeking one’s fortune in the market, an individual should be very clear with regards to a particular thing: you might want to make use of magnified instruments so that you can improve the probabilities of obtaining more returns. And one of those instruments is termed “options”. So, what are options and what do you mean by “options trading”? Options trading is a type of trading where a person can agree to exercise either the call (sell or pull (buy)) choice on or before a previously-agreed date. Options are of various kinds: American, European, Exchange traded, Over-the-counter, by Expiration, by Underlying Security, Employee Stock, Cash Settled etc. There is another kind of option here: Binary Options trading. (Taken from- http://www.binaryoptionstrategy.eu/binary-trading)
So, specifically what are binary options? It is a kind of financial derivative which pays the trader in either a previously agreed-upon amount of cash or the price of an underlying asset. There are two common types of options: the first one is cash-or-nothing, while the second one is asset-or-nothing. To understand how binary options work, you need to understand that it is a kind of gamble. Here, the trader basically places a ‘bet’ on the cost of an asset (which can be a commodity, a currency pair, a stock or a share) on whether it would increase or decrease on or before a particular time period. If the prices show a chance to go upward, then the trader normally buys the option, and if it is the reverse, they sell it. This usually sounds like gambling since, as said before already, binary options are usually ‘something or nothing at all’. This essentially implies that you either get the promised amount or nothing at all. This, as can be easily understood, poses a huge risk to people and hence the chances of minting a profit out of it are highly dicey. But still, it is always the characteristic of the brave to undertake risks. Below are listed a few reasons why it is wise to trade binary options:
First and foremost, when you trade options, you get a wide selection to trade. The more you come to learn about trading options, the more you realise that there are a huge number of things that can be traded in the market. There are things such as commodities, currencies, shares, stocks etc. The more you learn, the greater efficiency you achieve at diversifying your portfolio and offsetting any possible losses that might be occurring. In today’s world, a good number of brokerages offer free accounts to trade with. So, this would mean that a majority of people would be permitted to put money into accounts to be put directly into the trade. Thus, you’ll be able to use your money in the exact way you please. The risks and rewards are always known. Since in binary options trading, it doesn’t really matter whether the market is going long or short (because all you need to check is whether or not the prices are closing at the desired levels on a particular date). There is virtually no risk of leverage costing you more than you are sure to spend. The amount you invest here is the factor that you’re risking. This happens to be one of the biggest primary advantages of binary options. Even though it is regularly thought that binary options produce greater payouts matched against other investments and are hence riskier compared to others, it is no longer so in today’s world. This is because most brokerages offer a percentage of the money you invest; if you happen to lose. So, the risks are mitigated to an extent. These, to put it briefly, are among the greatest advantage of trading binary options.