Binary Options Explained For Beginners

Trading in options are based on the value of underlying assets, such as title to a property, while the property is the underlying assets, while the title is traded, there is no physical possession of the assets. Binary options is a type of option are so called because of the twin (binary) nature of their outcomes; that is 0% or 100%. Also called all or nothing investment, fixed return option (FRO) and digital options. These types of investment are quite easy to understand and engage in. For a beginner, there are several binary option brokers out there, but I would recommend HighLow or Binary Cent as the broker of choice.

Binary Options Returns Explained

With binary options, you are guaranteed up to 85% return on your investments, although, traditionally it pays between 61% – 85%. Though most brokers pay between 70% – 75%. The difference being their commission, as no other commission is charged. The maturity time can be anything from 10 minutes to one month.  For instance if a buyer believes that gold will reach $1,500 an ounce by 14.00 EST, he buys (Call option) if the option materializes, he gains, the gain will depend on the invested amount and the rate being offered by the broker. However, if Gold does not reach $1,500, by the expiry time, he gets nothing. A Put option works in the reverse direction. If the trader believes that Gold will fall to $1,500 by 14.00 EST, he sells. If the expected outcome materializes he gains, if not he loses. The nature of binary option has made people to erroneously refer to it as gambling, because of its Yes or No nature. However, gambling depends on luck and chance, while binary option trade is pure analysis of market fundamentals.

For more basics, I recommend reading our Binary Options 101 page.

Just Starting Out

For a beginner, first you need a PC with an internet connection, a very fast PC and a reliable internet connection will be ideal. Then register with a broker of your choice; brokers can be found on the internet, most brokers offering binary options are under the regulatory oversight of a regulatory authority. It is important to inquire about the regulatory status of your desired broker to avoid being registered with unregistered brokers and the unpleasant consequences it entails. Complete the registration formalities and in no time, you are already trading.

The same goes for binary options software. You always want to end up with a software that is regulated. Systems we’ve had issues with include Binary Robot 365, Option Robot and Binary Option Auto Trading.

Binary options, opportunities exist to trade in stocks such as Apple, Microsoft, Coca-Cola etc.; currency pairs, e.g. AUD/USD, or EUR/JPY, indexes such as Dow Jones, NASDAQ or CAC; or commodities such as copper, gold, oil, and silver.

Binary Options are Easy to Trade

Since it is web based trades, you are presented the opportunity to either trade on the go or to download the software, though this option is broker specific. As the name suggest all or nothing. For instance if you wish to trade copper, you can place a Call option that price of copper will be $4 by 14.00 EST, if it works out, you gain if not its loss. However some brokers give back a certain percent of the investment back as rebate or refund, usually between 10 -15%.

As a form of investment, binary option offer several advantages. For one, the returns are limitless, only very few investments match its rate of return. With 85% return, it becomes easy to increase your wealth. Also, the maturity time is relatively short. From just above 10 minutes to one month; meaning that in just 15 minutes, you can receive great returns on your investment. The market is also open 24/7, unlike other markets that are closed on weekends and public holidays. Besides, weekend trading attracts a far higher yield on investment. However, investments are usually a risky affair, profits are never guaranteed.