What are Binary Options, and How Can You Trade Them?
A binary option is a general term for an option that either pays a fixed percentage of the value amount you invested upon expiration, or nothing, depending upon whether or not the stated criteria was met. Since the payoff is either a fixed amount or nothing, binary options are sometimes referred to as fixed return options (FROs) or all-or-nothing options. Occasionally, they’re also referred to as digital options. Binary simply means there are only two possible outcomes.
Binary options are European style options, which means they only trade on expiration day, unlike American style options that can be traded at any time. Binary options fall into the category of “exotic options”, but in reality, they’re really quite simple. They’re simple because you already know your profit or loss before you place the trade. You also know what is needed for the trade to end in a profit or a loss.
Binary option trading is growing in popularity among traders because of their simplicity. A trader only needs to worry about the underlying security finishing in the money, or out. Binaries also cover a wide range of underlying securities, including individual stocks, indices, ETFs, and even commodities. Another advantage is binaries are issued 24/7, so you can make very short-term plays. If you think that a certain stock is going to move up in the next hour, you can buy a binary call option that expires in one hour. If the stock is in the money by even just $.01, the option pays off.
Binary options are extremely easy to trade. Jon Najarian, of OptionMonster fame, referred to binary options as, "options with training wheels." Binary options are perfect for traders who:
- Are new to option trading
- Prefer buying puts and calls over complex options strategies
- Are looking for a very short term trade, such as an hour or a day
- Don't want to learn the complexities of "the Greeks" or how Implied Volatility affects options
- Want to trade currencies or commodities without putting much capital at risk
The downside to binary options is there aren’t a lot of firms that allow traders to trade them in their accounts. The leading binary options trading is Global Option. They help their customers by creating a slate of possible choices for options, and allow you to trade very small amounts of money. With Global Option, you can put as little as $30 into a given option, you only need to deposit $100 in your account to get started, and they don’t have any account fees. You can trade as often, or as little as you’d like. If you’re interested in getting your feet wet with these very simple options, just click on the ad to the left.
Start Trading Binary Options Today
Global Option is the cheapest and easiest way to get started trading binary options. You can open an account and fund your account with your credit card in about 10 minutes. For as little as $100 to start off, you can be trading binary options a few minutes from now! Click on the ad to the left to open your free account today.