SEO title: Binary Options trading and its Fundamentals
Binary Options Trading
With two basic types of binary options, binary options trading are on a high nowadays. While its cash – or – nothing offers fixed amount of funds on the expiry of the option, the asset – or – nothing option is meant to pay with the underlying security value. Since the possible outcomes are two in number, the options are called binary. Other names that follow are Digital options, Fixed return options and all – for – nothing options. Binary options can be categorized on the basis of exchange trade and on – exchange trade. Contracts of binary options that are available over – the – counter, that is, directly from the issuer or the buyer are known as ion - exchange trade binary options. These types of contracts are taken as exotic instruments with no available liquid market for the purpose of trading between issuance as well as expiration. Exchange – trade binary options, that was standardized in 2008, offers to trade on the basis of continuous quotations.
Popularity of Binary Options Trading Platform
Trading platforms dealing with binary options trade are basically web based trading arenas availing over – the – counter trading. It is through these platforms that now – professionals avail the chances of winning profit on some kind of underlying asset such that their popularity is increasing day by day. However, the return has to base on a proper prediction that is short term in nature. Such platforms do not allow liquidation of funds before the date of expiry and the profit and loss involved in the trade is predetermined. The fun with such trading platforms is that one even with no knowledge of the stock market can carry on with a binary trade here. All that the investor needs to choose is the price of his or her assets which can either be higher or lower on the date of expiration of the options. Binary options can be availed as long as sixty minutes or even less than that and the trading goes on till ten minutes are left for the expiration date.
Mode of Operation
To start with, a trader has to set the spot price of his or her underlying asset as the options’ strike price. Now in case the price of the asset happens to increase and close at a point that exceeds the strike price then the option will be considered expired in money. In the case at expiry, the price of the asset remains unchanged, the investor would receive the money back. The reason behind the popularity of binary trading platform is that no direct fees from the investor are charged for purchasing any option. On the expiry of an option the profit ranges from 61% to that of 85% to that of the initial investment. The investor also receives a rebate by a minimum of zero percent to a maximum of fifteen percent on the investment made.
Choosing a Platform
While choosing a platform, a trader should keep a track of how fair it is, which can be determined by the following points:
The trading volume of the platform should be high.
The price quotes provide the platform are reliable, be it from the third party data provider or some other source.
The price quotes for the platform is the same with put or call option on the same asset, same expiration time as well as the same strike price.
The platform should manage its exposures effectively such that investors trade against each other and not against the platform.
Withdrawals are approved within two to three days time span.