Information about trading in binary options

Information about trading in binary options

A binary option is a derivative option in which the trader trades with respect to the price movement of an asset. Many brokers provide free signals to the trader for binary options. The word binary suggests that it could have two outcomes.

The trader has two options in the form of buy or sells which will give rise to two outcomes i.e.; profit or loss. The trader would earn a profit if the bet made ends up in his favor. The binary option may end up as “in the money” where the price of the asset is more than the strike price on a future date. The binary option can also end as “out the money” where the strike price is more than the price of the asset on a future date.

Binary options are available in two formats. The first one being either cash or nothing binary option where the trader receives a fixed amount if the option expires at “in the money” and zero cash if it expires on “out the money.” The second one being an asset or nothing binary option where the trader receives an amount which is equivalent to the market value of the asset if the option expires at “in the money” and zero amount when the option expires at “out the money.

Important elements of binary options

  • Cash-settled
  • Put option
  • Call option
  • Expiry date
  • Price of the asset
  • Settlement price

Advantages of binary options

  • Trading in binary option is hassle-free as the trades in the trending security.
  • Binary options are available with a different time period. Hence, it provides a wide range of options to trade as per their requirement.
  • There is no actual buying and selling of the asset.
  • Binary options provide fixed payouts to the traders.
  • Binary options can also be used for speculative trading and hedging fora short term period.
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