Binary Options Trading: How It Works…

Binary options trading is often promoted as a fast way to make a lot of money, but it can also be a fast way to lose a lot of money if you don’t know what you are doing! So if this is something you are interested in then it is very important that you educate yourself about how this type of trading works before you invest any of your hard earned cash.

The trading of binary options is what you can think of as a type of “all or nothing” trading.  If a certain stock is higher or lower than a certain price at the date of expiration of the binary option, the buyer will receive either the entire amount or nothing at all. For example, I buy the stock of this corporation for $100. I can say that the price of the stock will be at or above $100 at 11:17 AM of the day my binary option expires, I can buy a “Call” or “Up” Option. If I am correct, I will receive $1000, which is a predetermined amount of money. However, if I am wrong, I do not receive any money. I can also bet that the price will be lower than $100 at the time and date of expiry. In that case, I purchase a “Put” or “Down” Option.

Although simple enough, when trading, it is vital to comprehend the costs and benefits of binary options trading, which are not similar to traditional options. One notable story is last June 2013, when the United States Securities and Exchange Commission alerted buyers regarding fraudulent binary options trading platforms, as there was a company selling them unlawfully and illegally. However, if done legally, the buyer will be aware of the risk and reward as there are only two options—getting the money completely or losing it completely. However, the potential for loss may be greater with binary options, as a person has to be right more often than he or she is wrong to always be gaining money.

One option that appeals to a lot of newbie traders is to invest in an automated trading system which can advise users in their binary option trading decisions. There are many bots on the market, so of course you should be advised to do your due diligence and investigate which trading robot is best for your situation before making a purchase.

You should also be aware that Binary options platforms have often been criticized as gaming platforms instead of investment platforms as they require little to no know how of the stock market; all one really has to do is see whether the stock’s price or asset will rise or fall in a given time frame.