What are Binary Options?

December 1, 2014 by in category Articles tagged as , , with 2 and 3
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Binary Options – a type of options, the basic principle of which consists of determining the movement direction of asset price (currency pair, commodities, stocks).

What are binary options in simple words – a financial instrument, where you get a fixed profit if the price of the selected option will prove your forecast, but you lose the entire bet if the price movement will not match your prediction. In fact, the success of the transaction on binary options depends only on accuracy of the forecasts, for example, higher/lower – from where the options got their name “binary” (binary = presented in the form of two elements). An option itself can be represented by various currency pairs, stocks, stock market indices, commodities and even cryptocurrency.

All the trader need to do is determine whether the drop or increase of the option price for the certain period will be expected. If you previously did not know what binary options are, but have heard at least something connected with it, you probably have seen two buttons: CALL and PUT, this is something like traders control panel, where trader chooses will the price go UP or DOWN. As for the binary option expiration period, then there are several options: from 60 seconds till one year. Let’s look at example to make it all clear.

On the technology market, a well-known company Apple announced the release of the next generation of their phones, for example iPhone 8, on 01/01/2016 at 20:00 by UK time. Statistically proven that with the messages of positive news (for example, the launch of a new product), the company stock price begins to rise, and therefore, we can safely BUY Apple Inc. binary option, and choose the time of expiry on 21:00 by UK time. In this case the stock price will more likely grow, and we’ll get our profits.

When finalising this deal, broker has shown us, that in case of correct predictions on stock price of Apple, the profit will be 80%. You bought an option for £100. So, let’s say you have made the right prognosis and option closed in positive area. Broker counted to pay you back £180 (£100 – your bet + £80 – this is your gain in the amount of 80% of the sale price). It turns out that on the obvious things and just over an hour, you will be able to earn 80% of the investment. What could be better? The answer is simple – nothing. Even sport betting is much more complicated and chances of winning are less. Some say poker is more profitable? Ehmm, you forgot that poker consists of 30% luck if no more, and the amount of knowledge about poker you need in order to be better than others and to earn decent amount of cash.

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The average percent of return in winning binary option is about 80%, and in case of loss you have the right to receive up to 45% back from the value of the option that you have purchased. (In case of unsuccessful prediction, your binary options transaction could be insured by some of the brokers, but not all binary options brokers offer this service).

A brief history of Binary Options

Binary options were legalized on the Chicago Stock Exchange in the United States in 2008, and quickly became one of the most popular ways of trading on the financial market in the world. Binary options are significantly different from other types of trades, because here you do not acquire any assets, i.e. do not get to be their owner, and you’re just trying to guess the direction of the stock price of the asset. You can imagine it as betting on sports, but instead of competing teams you have assets on your screen.

How to make money on Binary Options?

Whether you’re a novice or an expert in the financial market – it doesn’t matter. Here you can make money on the binary options, but you must adhere to certain rules. First, you need to set yourself a realistic plan of earnings, for example, 10% of the initial deposit for the first month. Secondly, you must understand that your goal is quality, not quantity. You can’t allow yourself to be in the situation when trader starts to buy anything and anyhow. It is better to enter into deal only with five options, but at the same time be sure by almost 100% that you have the correct and reasonable forecast to enter into those deals. Thirdly, you should decide on the trading strategy that is best suited to you and well proven in the trial demo accounts. Also, it is possible to use the MetaTrader 4 trading platform, in which there is an opportunity to establish indicators that will prompt you when and which asset to buy. You can also follow financial news on shares or currencies, read the opinions of experts and analysts, and considering all that make your choice.

Where to start trading binary options?

There are a number of brokers who provide perfect quality service to trade binary options on the financial market. We have prepared a list of the best binary options brokers that are suitable for trading in UK, as they have website on English, UK based customer service and a convenient ways of money deposit/withdrawal. In our list, all brokers have the appropriate certificates and they work in binary options industry not for the first year. On top of that our brokers provide traders with high quality, comfortable and easy to use trading platforms which makes the traders life much easier.

2 Comments

  • Oliver
    on December 18, 2014 Reply

    Thanks for that! Now I know what binary options are! 😉

  • Sammy
    on May 12, 2015 Reply

    Lovely blog post, looking forward to more of these kinds of post, as I learn about binary options

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Binary Options trading involves high risks which may not be suitable for every person. Never invest money which you can’t afford to lose and make sure you familiarise yourself with the basics of binary options before you start. MrBinary.co.uk is not responsible for any losses, as all our pages should be used for informational purposes only.

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