Binary options are classified as exotic options, but they are actually very easy to use and functionally understand. The High-Low option is the most widespread binary option and it provides access to commodities, indices, foreign exchange and stocks. It is also known as the fixed-return option. If the trader correctly wagers on the direction of the market and the price at the expiry time is on the strike price’s right side, the trader will gain a fixed return despite of the way the instrument moved. An incorrect wager on the market’s direction makes the trader lose his investment.
A trader that considers a rising market would make a “call” purchase. If the market seems to be failing, the trader will buy “put.” For a “call” to gain funds, the value must be over the strike price at the time of expiry. For a put to gain funds, the value must be under the strike price at the time of expiry.
Understanding Binary Options
There are a lot of things that a trader must learn about before he can start with binary options. One way to get educated is through www.binarybrokerz.
First, you must understand that there are two possible outcomes. The call and put purchases are the choices that you have to make. You buy a PUT when you think that the price is declining and a Call is purchase when there seems to be increase in the price.
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Deciding your position is another great step. It is important for you to evaluate the market conditions that surround your selected asset, so that you can determine if the price is failing or rising. If you have a correct insight on the expiry date, the payoff will be your contract’s settlement value.
Learning how to determine a contact price – The price of a contract on binary options is basically equal to the market’s insight on the possibility of what is happening.
Learning binary options trading’s advantages over the traditional options – One advantage is that binary options are easier to trade as they only require a correct direction of the underlying asset’s price movement. Another advantage is that these options have controlled risk-to-reward percentage that allows you to predetermine the time of acquisition of the contract. Unlike tradition option, binary options have payout amounts that are not comparative to the amount wherein the options finish up in-the-money. Last advantage is that these options can last for virtually any time duration – it can last for just a few minutes to several months.
Understanding the percentage is also an important advantage. It is important that you know the percentage of time when you will have to be precisely correct in ordering to profit from binary options.
Knowing the right terms is another advantage that you should enjoy while trying to learn the ropes of binary options? There are several terms that traders and brokers use and if you are behind this, you may find it hard to communicate with other traders and broker.
Lastly, binary options offer a good way to earn money. And you could be among the lucky ones…