Binary Option Types

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Types of Binary Options

Binary options in the US – regulated and exchange-traded only.

The only way to trade binary options legally in the United States is on a CFTC-regulated, United States based exchange.

Binary options are sometimes offered by a broker. Nadex is different and offers a sharp contrast.

We offer a revolutionary approach to trading for the active short-term trader. We do it as a well-regulated, leading US based binary options exchange.

This is an important difference you will want to understand.

Our job as an exchange is to match buyers and sellers across a wide range of active global markets.

We never take the other side of a trade, but many brokers do. What that means for you is if you trade with a broker, they could be on the other side of your trade and profit only if you fail.

Our interest is in supporting a dynamic marketplace built with the short term, active trader in mind. We take our role seriously as the leading US based exchange offering binary options.

As a leading exchange, we want you to have everything you need to trade. We offer different strikes, timeframes and markets to choose from. It’s why we provide both a robust desktop platform and a brand new mobile app specifically built for short term traders.

And it’s the reason we work to offer such wide access to dynamic trading opportunities across all the markets you love.

Volatility and binary options.

Volatility moves markets, drives trading decisions and of course can make things fun.

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The ability to harness that volatility means opportunity when you are trading.

It’s why we created our binary options in a way to allow exposure to volatility with a simple, easy to follow approach.

Our binary options provide unique opportunities to make short term trades and capture volatility, while also providing the flexibility to close positions early and the control to allow traders to set their own level of risk.

One of the ways binary options offer exposure to volatility is based on the pricing of the contract relative to the underlying market.

The more active the underlying market, the more movement in the binary option’s price and even in relatively flat underlying markets, the at-the-money binary options can be volatile.

We are offer a wide range of opportunities to trade based on volatility with binary options. It’s why we create more strike prices and offer more contracts on a broad range of active global markets.

Different timeframes to trade binary options.

We believe traders should have straightforward access to multiple global markets around the clock.

And we want to provide multiple time frames within our 23 hour trading day for you to trade.

Choose timeframes lasting 5 minutes to two hours and up to a week with plenty of opportunities in between.

Trading at Nadex is dynamic and markets can move fast.

For many, that type of fluid activity is exactly why they started trading.

We’ve created a vibrant marketplace that provides the variety to trade stock indices, forex, and commodities from a single account.

But the opportunities to trade with us really grow when you consider all of the time horizons our contracts cover and the number of strikes we offer in each market.

While binary options are sought by day traders wanting trades in short time horizons, Nadex offers a lot of variability and choices when it comes to the length of our short term contracts with multiple opportunities to trade throughout the day and the week.

Each time frame has its advantages.

Traders wanting to harness volatility in flat or trending markets like shorter frames because as the market gets closer to expiration, the price of the binary can fluctuate with increased volatility.

This makes for very active and exciting market action.

If you want to take a position that spans a few hours, or a day or week, you can do that too.

This enables you to trade based on a variety of different strategies. And you’ll always have the flexibility to close positions early to take profits or limit losses.

Binary Options Basics

Binary Options Types, Pros and Cons

Binary options have become very popular investment tool, perhaps due to how simple they seem to be. The name ‘binary’ hints at the fact that traders are presented with two choices. This makes them seem easy to understand, which is part of the reason why traders with fewer skills like them.

The idea is that you are predicting on which way prices in various global markets will go in a specified period of time. If you guess correctly then you claim your profit, and if you guess incorrectly, you lose your stake. That’s it!

Binary Options Basics – What are They?

One of the binary options basics you need to be aware of is that the type you’ll see traded most often is called a high-low or fixed-return option, which lets you wager on the movements of stocks, indices, commodities and foreign exchange. These options expire at a predetermined date, time and strike price. If a trader bets correctly on the market’s direction and the final price when the deal expires, they get paid a fixed amount. It doesn’t matter if the instrument has moved a little or a lot since the trade was opened, it just counts as a win, and the trader still receives that same amount. If they get it wrong, they lose their original stake.

So, you see how simple life as a binary options trader appears to be? You’re betting that a stock, index, commodity or currency pair is going to go one way or the other. If you think your asset or index is going to go up, you take what’s called a “call.” If you think it’s going to drop, then you take what’s called a “put.” A call makes money when the instrument is trading higher than the strike price. A put makes money when the instrument is trading lower than the strike price when the deal expires. The broker lets you know what the strike price, expiration date, payout, and risk are when the trade is first set up. With the majority of high-low binary options traded beyond US borders, the strike price is usually the current market price of the asset or index.

US Binary Options vs. Overseas Binary Options

In countries outside the US, binary options usually pay out a set amount and bring a set level of risk. It’s also brokers who offer them directly instead of an exchange. The brokers make their money by taking in more on losing trades than they pay out on winning trades. Apart from certain exceptions, these financial instruments will usually be held until the date of expiry.

US Binary options listings were first made available by the Chicago Board Options Exchange (CBOE) in 2008, which is regulated by the SEC.

These options can be traded at any time, with the rate sitting somewhere between one and a hundred, depending on how likely each one is to make or lose money. On-screen, the trader sees a totally transparent deal and is free to cut their losses or walk away with their profits before the expiry time if they want to.

A trader may also choose to enter while the rate is fluctuating, in order to take advantage of different risk-to-reward situations, or hold until the trade expires, closing the position at the highest amount of gain or loss as compared to what it was when they entered.

Since US binary options are traded on an exchange, this means that every trade takes place between a buyer and a seller who are willing to enter into this arrangement with each other. To make its money the exchange adds a fee that matches counter-parties.

Example of a High-Low Option

In this example, you believe that the NASDAQ index will rally for the duration of the trading day, so you purchase an index call option. The index is currently trading at 1,700, so you’re betting that when your trade expires it will be sitting at a higher number. You have a huge amount of choice when it comes to selecting when you want that expiration time to be. You could choose minutes away, or you could settle for months. It all depends on what your analysis points to. If it suggests that 30 minutes from now would be the best time, then you can choose that. This ‘for example’ deal will pay out 60% on top of your original stake if the NASDAQ rises above 1,800 at that time. If it drops to less than that then you will lose your stake. Minimum and maximum stakes vary from broker to broker.

Let’s say you invest $100 in the call. Expiration is in 30 minutes. The NASDAQ price at expiration is where the clock stops and determines whether you win or lose. The price at expiration could be the last quoted price, or the (bid+ask)/2. Every broker will have their own price rules about expiration.

With this example, we’re assuming that the last quote on the NASDAQ before expiration was 1,703, which means you get a $120 profit (because that’s 60% of $200). You also get your original $200 investment back as well. But if the price at expiration had been 1699 you would kiss your original $200 goodbye.

In the event that the price on expiration is exactly the same as the strike price, the trader usually gets their money back, although you should check with individual brokers to be sure of what their rules are. Any profits that you make will be added to your trader count automatically as soon as the position is closed.

Other Types of Binary Options

This example is for a typical high-low binary option—the most often traded binary option outside the US, but international brokers will usually offer a whole host of other types of binaries too. Here are two examples:

  • “one-touch” options. The asset you’re trading needs to hit the strike price only once before expiration to make you some money. Targets are set above and below the present price, so traders can pick which one they think the price will hit before the expiration date and time.
  • “range” options. The trader defines a price range that the asset will trade inside until expiry. You win if the price doesn’t step outside this range. You lose if it does.

With a lot of brokers competing in the binary options arena, some have taken to offering products that give payouts between 40% and 400%. Many will have different structures and requirements, but you’ll always know the elements of risk and reward before you embark upon the trade. This potentially means you can make a lot of money from your investment, but brokers don’t give money away, so with such big headline figures, chances are you won’t.

In contrast to US binary option brokers, there are some foreign brokers who will permit traders to exit positions before they expire, but most don’t. Doing this before a position expires usually means the broker won’t pay out as much, or you’ll suffer a modest loss, but not have to give up the whole investment.

The Pros and Cons of Binary Options

You’ll always know the risk and reward ahead of time, which eliminates a huge amount of doubt. And you’ll always know how much you’re going to win or lose because both amounts are fixed. No trader likes unforeseen surprises, so this is a big plus for this kind of trading. Another one is the fact that there are often no fees or commissions to be paid.

Simplicity is obviously a factor because you’re essentially tossing a coin and placing a wager on heads or tails. The asset either goes up or it goes down.

You also don’t need to worry about liquidity, because as a trader you won’t be taking ownership of any underlying asset.

Brokers can offer endless strike prices and expiration times and dates, so there are lots of choices. It’s also worth bearing in mind that at any time of the day or night market is open somewhere doing a roaring trade in many different asset classes..

Types of Binary Options

There are many different types of Binary Options that you are going to be able to trade online, and in this guide we are going to introduce you to and give you a better understanding of the many different types of Binary Options that you will come across.

Indices Binary Options

One of the most traded Binary Options are those which are based on Indices, there are many Stock Exchanges around the world, and when you place a trade on this type of Binary Option you will be predicting whether you think the value of their top traded stocks and shares that make up any particular Stock Exchange is going to be higher or lower than it was when you placed your trade over a set period of time.

    What Indices Can I Trade?

You are going to be able to place trades on absolutely any Stock Indices, and with there being so many of them available you will find no shortage of them. The most commonly traded Binary Options pertaining to Indices are the CAC 4, DAX, Dow Jones, FTSE 100, Hang Seng, and NASDAQ.
What are the Benefits of Indices Trading?

The main attraction for anyone wishing to start trading Indices online is that unlike going through a Stock Broker you are never going to have to purchase the stocks and shares in the companies that make up the Indices and are not paying those brokers huge fees and commissions!

Currency and Forex Trading Options

We are finding that more and more people are opting to trade two different currencies against each other when they start to trade Binary Options online, and there are many reasons they tend to do this, they may be looking to make a profit as part of their daily trading strategy or could be looking to hedge any physical currency purchases they have made in respect to buying a property overseas or even when they have purchased currency for an upcoming holiday or business trip abroad.

  • What Currencies Pairings Can I Trade? There are no limits imposed in regards to pairing together any two currencies. You can pair up any major currency with another, such as US Dollars, UK Pounds Sterling, Yen, Australian and Canadian Dollars to name just a few currencies that can be paired up and traded against each other.
  • Can I Pair Bitcoins with Other Currencies? If you are interested in pairing up Bitcoin with other currencies then you are in luck, for we have seen lots of different Binary Option sites allowing their customer to be able to do just that. At this moment in time you are only going to be able to pair Bitcoins with US Dollars, as that is how Bitcoins are usually valued.

Commodity Binary Options

Another very popular type of Binary Options are Commodity based options, these types of options allow you to trade on the value of fixed commodities but without the need to purchase those assets. Here are a few commonly asked questions reading Commodity based Binary options trading.

    What are Commodity Based Binary Options?

When you are thinking of trading Commodities you will be simply trading on the value of a fixed commodity such as the value of Gold or Silver for example over a set period of time. These types of Binary Options allow you to make a profit without you ever having to buy those commodities which can be quite expensive.
What Commodities can I Trade?

The most commonly traded Commodity based Binary Options are based on the value of Gold, Silver, Copper and Oil. Having the ability to trade on the value of these commodities without ever having to buy and then sell them is what makes these types of Binary Options trades so popular with traders across the globe!

Individual Stocks Binary Options

Buying and selling Stocks and Shares is a pass time as well as a business for many people, however with the value of them going up and down fluctuating sometimes wildly through the working day it can be a very risky proposition when you are new to the trading environment.

You are now able to trade hundreds if not thousands of different stocks and shares but without the need to buy shares in any company you wish to invest in. Below are many questions along with the respective answers you may have in regards to becoming a Binary Options trader in regards to using Stocks as the basis for your Binary Options trades.

    What are the Most Traded Stocks?

You will find it is the larger and more well known companies that make up the largest volume of Binary Options trade made each day of the week, you will be able to trade in regards to the value of Stock from companies such as Microsoft, Toyota Motors, Vodaphone and even Walt Disney, any company offering shares can be used as the basis for your Binary Option trades!
Can I Trade Social Media Stocks?

Many people enjoy using Social Media and as such if you are interested in trading Binary Options based on the Share Prices of sites such as Twitter and Facebook then you will be pleased to know many Binary Options trading sites will allow you to do just that!
What Banking Binary Option Trades are Available?

Due to the Banking Industry being one of the most volatile sectors it is often the value of shares in Banking instructions that a lot of traders tend to trade as part of their Binary Options trades, and you will quite easily be able to trade Bank based options such as Goldman Sachs, Barclays and J P Morgan Chase to name but three of the available ones!
What Profit Can I Make Trading Binary Options?

The one question you may be asking is just how much by way of profit can you make when trading Binary Options online. Each trading site will display the maximum profit you can make per trade which is often in the 80 percent plus range on every single trade you make, so the profits really are there for the taking!

Best Binary Options Brokers 2020:
  • Binarium
    Binarium

    The Best Binary Options Broker 2020!
    Perfect For Beginners!
    Free Demo Account!
    Free Trading Education!

  • Binomo
    Binomo

    Good choice for experienced traders!

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How To Make Money on Binary Options Trading
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