The binary option is a financial derivative that traders can use to speculate on the price movement of a financial asset without actually taking ownership of that asset. This method of trading has been available since 2008 and is probably the most straight forward, easy to learn derivative instrument on the market.
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IQ Option updated their trading platform in 2015 and the new updated platform can be quite impressive to view. Forget about your boring white label SpotOption interface. This one-of-a-kind interface displays beautifully that has a high contrast graph over a dark screen. The company utilises Thomson Reuters quotes for transparency. This ensures the credibility of the provider concerning quotes’ correctness of assets and currencies. I should mention that the quotes are utilised not only for expiries but also during the transaction time.
Minimum trade is $1 and minimum deposit is $10. This is why I recommend IQ Option to beginners. The low minimum deposit and investment in a trade makes IQ Option ideal for small time traders. The unlimited demo account enables new traders to try out the broker’s trading platform using virtual money. But importantly I also trust IQ Option to honour withdrawals without delays.
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Binary.com is perhaps not surprisingly a leading provider of binary options. The business was previously known as Betonmarkets. Unlike spread betting, Binary.com offers the ability to take fixed odds punts. You bet 20 quid and the most you risk is 20 quid irrespective how far the market moves – reassuring for those worried about unlimited risk. They offer trading on global indices, currency pairs and a number of shares, with trades lasting from just 5 seconds to 6 months and you can win irrespective if the market is rising, falling or range trading. You can buy a contract for just 10 quid or 10k, it’s up to the trader/investor and definitely recommended. They’ve been in business for over 12 years and this outfit is of a different class altogether to other binary brokers.
Binary Options Introduction
The word ‘binary options’ means ‘two options’, meaning that at any given point in time, the trader has two options to choose from. Binary options go by several names. They are also called digital options, and because the returns on a trade are set before the trade is executed and cannot be changed, they are also called “fixed return options”. They are also known as all-or-nothing options due to the fact that the payoff is literally all or nothing.
The price of a binary bet is displayed as an index between 0 and 100. If the event which is being bet on happens, the bet is settled at 100, if it does not happen the bet will finish at 0. The binary betting provider will quote a price on the event and if the bettor thinks it will happen they will buy the bet, if they don’t think it will happen they will sell the bet.
An example of a binary options trade
The best way to explain this form of financial betting is to give an example of one of the most basic forms of binary betting and that is an ‘Up or Down’ Bet. Imagine the scenario, it is 3.30 pm and the FTSE is currently standing at 5400. The market closed yesterday at 5425 and the broker that you are using is quoting the binary ‘FTSE to Finish Up’ price at 24 – 26. In your opinion you believe that the FTSE will start to rise towards the closing stages of the day’s trading so you decide to buy the ‘FTSE to Finish Up’ binary at £20 per point at the price quoted of 26. In this instance your judgement proved to be correct as the FTSE finished at 5450 so you win £1480 (100 – 26) = 74 x20.
As long at the FTSE finished up the bet will be settled at 100, if it had not gone up your bet would have been settled at 0. So, if the FTSE had not gone up by the close of business on that particular day you would have lost £520. That is calculated by multiplying the price which is 26 by the stake which is £20.
Advantages of Binary Options
Controlled Risk. When trading you know exactly how much you stand to make and lose depending upon which way the market moves. This differs to spread betting, CFDs and other derivatives where losses are unknown (unless stop losses and limit orders are implemented).
Trade on falling markets. Binary options allow traders to speculate on prices going down in value meaning profits can be made when markets are bearish. This feature also allows you to hedge against negative price movements that might affect other holdings you may have.
Simplicity. As mentioned before, binaries are extremely straight forward. Simply decide which way you think the market is going to move, click on call or put and wait for the contract to expire.
Binary options are one of the most simple trading instruments available and are centred on the trader choosing to call or put (speculate on a financial price going up or down). Due to this simplicity and that binaries are available in the majority of countries worldwide; they are also one of the fastest growing methods of trading. If you want to get started with binary trading today then check out one of our recommended brokers above.