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Is It Time to Trade Binary Options?

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Trade Binary Options

Want to Trade Binary Options?

There are a lot of people anxious to learn how to trade binary options. The basic strategy seems ridiculously simple, about as simple as flipping a coin, yet seems to offer large payouts on the bets that come through. Of course, all options trades actually involve a large degree of risk, and binary options are no exception.

Unlike regular options where the trader technically buys and sells the asset in question and could theoretically end up owning it, binary options are nothing more than bets on the price and have no physical relationship to the item being bet upon. The way to trade binary options is relatively straightforward.

How to Trade Binary Options

• The trader first selects an asset on which binary trading is offered.

• Next, the trader decides upon the price at which he wants the option to strike.

• After this, a selection must be made between a binary put and a binary call.

• Finally, the trader chooses an expiration time that can happen as quickly as 30 minutes from the moment the option is written.

Possible Outcomes of Binary Options

• The asset could finish in the money. No matter how small the total is, a binary option that finishes in the money pays the exact same amount regardless of how much or little the play ends in the money. Payoffs tend to range in the area of 70% of the initial investment.

• The asset could hit the strike exactly. The investor gets their money back with no losses and no gains.

• The asset could finish out of the money. Unlike regular options, a binary that fails to come through is not a complete loss to the investor. A small percentage of the initial investment is returned, leaving a net loss of about 90% instead of the standard complete wipeout inflicted by regular out-of-the-money options.

Unfortunately, one can only trade binary options on the European model, which means that the investor cannot cash in as soon as the stock ticks over, but must instead wait for the expiration of the option.

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