If you are well educated in the fiancé world, you already known what binary option is, But for those who don’t, this is a new term for them. In the world of trading markets and investments, binary options are basically estimates made of assets and how they will perform during a certain period of time. To be able to fully comprehend how binary options work, you need to have a little bit of knowledge of trading and investing.
Binary options provide a simple way for one to trade price changes in various markets on a global scale. In order to participate in binary options, the trader needs fully understand the risks and rewards that are involved. Binary options is quite different from another type of older options available. When you fully understand how options work, you will find it is quite easy.
Different Assets That Can Be Traded As a Binary Options
A well-known binary option is the high-low option. These type of option allows a trader to have access to the following:
- Indices – examples includes NASDAQ, FTSE and much more.
- Commodities – Examples include oil, silver, gold and much more.
- Foreign Exchange
In the high-low binary option is also referred to as the fixed-return option. This is because they have a time duration on them before they expire, which is referred to a strike price. As a trader, you need to wage correctly on the markets direction and the price within the time of the expiry so as to get paid in fixed return. If the trader wages wrongly on the market, they will lose their entire investments. During the wager, if the trader suspects that the market is rising that can purchase what is referred to a call. If they suspect that the market is declining or falling, they can purchase what is referred to as a put.
In order to make money with a call, the price is supposed to be higher than the strike price at the expiry duration. In order to make money on a put, the price must come under the strike price at the time of expiry. The disclosure of the strike price, payout and risk and expiry is done during the traders’ outset.
Binary Option in the U.S and Foreign Countries
The difference of binary option in the USA and other countries is that they have fixed risks and also a fixed payout. They are also offered by individual brokers. The brokers make money from the percentages on the payout winnings and also when they collect losses from traders.
You will find that brokers from foreign countries are not allowed to offer binary options to residents in the United States. The only way a broker can offer to residents in the USA is if they are registered with the USA regulatory body. These can include the SEC or the Commodities Futures Trading Commission.
Other Forms of Binary Options
High-low binary option is one of the most common types that well known to traders. The high-low is quite common in the U.S, but there are other types of binary options that you can get from brokers on an international platform. Other than there high-low option there are other types out there, these includes:
- One touch binary option – this is where the price needs only to reach a certain target level before the expiry duration so that the trader can make money.
- Range binary option – This is where the trader is given the chance to choose a price range where the assets will trade within.
These are some of the common examples of binary option out there. Before one gets to choose the type they want, they need to fully understand the concept behind each option.