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Binary Options Guide: Binary Options Trading 101

Author Zizzur Staff. Published on August 20, 2011 - 8:04 pm (665 views — 392 words)

If you are searching for a binary options guide, then this may be exactly what you are looking for. This article will tackle the fundamentals of binary options trading so that you’ll be more familiar with it after reading it. Binary options trading is a kind of options trading that utilizes a fixed payout system wherein traders either earn profits or lose all of their investment, if they managed to make the correct prediction regarding the movement of an underlying instrument. Read the rest of this binary options guide to understand more regarding this form of options trading.

The first section of this binary options guide is a discussion of the contracts. Binary options contracts states a declaration of a price of an underlying asset in given future expiration time. If you believe that the statement is likely to happen, then you get a call option. However, if you think otherwise, then you purchase a put option.

Upon the expiration time, if you managed to correctly select what turned out to be the right options contract, you will be paid around 75% or more of the price of the contract (depending on the broker), thus giving you profits. However, if you did not select the right contract, you do not gain anything at all, thus the name of this kind of options trading. Fortunately, there are some trading platforms that give you back up to 15% of your investment on losses. Besides making the risks very quantifiable in this form of options trading, it also makes it more tolerable in the long run.

One factor that you have to bear in mind about binary options trading is that time dynamics play a part when dealing contracts. For example, a binary options contract that is already in the money and is about to expire will be more expensive, thus not much can be gained from it. At the same time, you may also claim a contract that is within the money prior to its expiration time. However, you will not receive the maximum payout since it hasn’t fully matured yet.

This binary options guide has tackled the nitty-gritty of this form of options trading. When trying to study this form of trading, bear in mind to also read about strategies that can aid you in managing your trades more effectively in the future.