Archive | Options

Investing in Currency

Let’s face it, when investing there are so many options, it is easy to feel like you are sinking. You’re looking for the best return, with the least amount of money down. Seems simple enough, until you really find out how many aspects to investing there are. Other articles have discussed how to make money by investing in penny stocks, investing in corporate stocks, flipping houses, or looking at programs for your retirement, but there are other commodities and investment opportunities you can be looking into as well. Investing in currency used to be only for the wealthy and privileged, but with global economics, even a novice investor can join the club. Read on to find out how you can too.

Starting off

Many economies are based on speculation, so the idea that currencies would fluctuate is not an uncommon occurrence. Research. I’ve said it before and I’ll say it again…research is key to getting a better return when investing. Look at the world economies. How do they stack up against each other? Before you make any type of decision, make sure you do your research and that will allow you to make a well educated and informed decision.

State ofthe Economy

The global economies are in a state of economic distress. But this has been known for the last ten years. You can be a novice investor and still be a savvy investor, if you research the state of the economy of the currency of the country you are looking to invest in. High interest rates do not dictate success when investing in currency. It is very important not to forget that high interest rates when dealing with currency, are usually signs of inflation, which would then, obviously, only drive down the worth of the investment…yielding a lower return.

What Seems Safe?

You’re looking to invest in a nation’s form of currency, how safe can it be? Well that is a good question, but the definition of safe, would be the information you retrieve in your research. You should be looking for a country that has a stable government, like the U.S., or Canada, or any other nation that hasn’t had a coup in the last hundred years or so. You should be looking at the economy, and as we have established, the more stable of an economy, the better off your returns will be.

Taking a Chance

foreign-currency-reserves-up

The difference between taking a chance and taking a risk, can be defined by the amount of knowledge you have on a subject matter, and the amount of resources you dump into it. Simply throwing money at something because you want it to work, doesn’t make it work. When looking at investing in currency, you have to look at the bigger picture. Look at investing in a country that has more to do with the stability to world economics. Take the U.S. as an example. Among being known for other things, the U.S. is a banking nation. This means that other countries invest in the U.S. because it has a stable government and a solid military. Its seemingly a solid bet to house their wealth and gold in the U.S. Similarly, the U.S. then charges interest on the money being stored, here, so just like your bank they are making money on your money. It is wise to invest in a country other countries are investing stock in because of their unwillingness to allow their investment fail. You risk losing your monetary investment whereas these countries risk looking the stability of their economies, and possibly the leadership and control over their populations. In comparison, you’re only taking a chance to what the amount that these countries are risking.

Currency has long been traded and invested, but usually only those with large amounts of capital were able to invest in it. We seen over the last few years, especially with the decline in the global marketplaces, more and more lower level investors taking higher risks and gaining a better monetary return on their investment because the bigger named investors were to worry-some with their capital to bet on anything that wasn’t a safe bet in their eyes. In my recent article, on December 12th, reported that Bitcoin will be on the trading floor in 2014. This is just starting the mainstream the investing potential in currency, no matter what kind of currency that may be. We’ve often found that those who follow the trends of investing, get left behind in the wake of the truly high profit margins once that trading has gone mainstream. So the question remains, are you going to wait and see if investing in currency is worth your research, time and money, or are you going to take a chance on an investment idea that has been around for centuries, that only the privileged few have been able to touch.

 

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How To Make Money Trading Stock Market Volatility

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An Explanation of the Stock Market Volatility Index (VIX)

VIX Index

With the Chicago Board Options Exchange (CBOE) Market Volatility Index (VIX) a household term that is widely known these days, many stock market investors and traders wonder how to make money trading stock market volatility.  The VIX is an instantaneous measure of how much options traders are willing to pay for put and call options that are written against the Standard and Poors 500 (S&P 500) stock market index.  S&P 500 index options are priced in part based on stock market volatility expected in the near-term.  Higher volatility expectations lead to higher options prices, since the likelihood of the options reaching their target price by the time they expire increases when large moves and volatility are expected in the S&P 500 index.  As a result, the parties that sell S&P 500 index options raise the prices they sell the options for to cover the increased risk that they may have to pay the buyers of the options upon expiration.  This causes the VIX to increase since it is based on the price of S&P 500 options.

It is important to understand that the VIX is only a gauge of put and call option buying activity, and is not a financial security that can be traded directly.  In other words, you cannot use an online brokerage account to buy and sell the symbol VIX.  There are options written against the movement of the VIX that can be purchased, but that is beyond the scope of this article.  What can be traded via an online brokerage account to make money trading stock market volatility is a variety of exchange traded funds (ETFs) that mimic the VIX by buying VIX options and related financial instruments that obtain their valuation based on the level of the VIX.  VIX ETFs are designed to rise or fall based on the movement of the VIX.  The direction they move in depends upon whether they are designed to be bullish on the VIX (go up when the VIX goes up) or bearish on the VIX (go up when the VIX goes down).

How To Trade Stock Market Volatility Using VIX Instruments

Stock Market VolatilityThe way to make money trading the VIX when one expects stock market volatility to increase is by purchasing an ETF that goes up in value as the VIX increases.  Volatility ETFs derive their value by using options and other financial instruments to mimic the increase of the VIX.  These ETFs come in forms that range from a one to one ratio to a two to one ratio, meaning when the VIX goes up 10% during a trading session, the one to one ETFs should increase 10%, whereas the two to one (or double) ETFs should increase 20%.  Unfortunately, in reality the VIX ETFs do not always perform as they are designed to perform during a trading session, so traders cannot always expect the double VIX ETFs to provide double the returns of the one to one ratio VIX ETFs.  However, the ones that are designed to move by double the movement of the VIX will move more than the one to one ETFs, so if one is expecting a short term spike in volatility, the double VIX ETFs are the best way to make money.

Money can also be made one when expects stock market volatility to decrease by purchasing an ETF that goes up in value as the VIX decreases (a short oriented VIX ETF) or by establishing a short position in a long oriented VIX ETF.  Stock market volatility and the VIX will fall after an event that causes the VIX to spike has passed, creating an excellent opportunity to make money on the short side of the stock market volatility trade.

The important thing to understand about trading volatility is that timing is crucial.  Unlike buying a stock, which can recover in price over the long run, if a trade does not work out as intended, long oriented ETFs designed to mimic the VIX lose value slowly over time.  They are useful for short-term volatility trading only and should never be held for long periods of time.

Historical VIX Trading

How To Make Money Trading Stock Market Volatility When You Expect The VIX To Rise

The following are some of the long oriented volatility ETFs that are designed to increase in price as the VIX increases in price.  Some of these volatility ETFs are designed to move two times the movement of the VIX.

  • ProShares Trust VIX Short-Term (Symbol:  VIXY) – VIXY is designed to match the performance of the S&P 500 VIX mid-term futures
  • ProShares Trust VIX Mid-Term Futures Index (Symbol:  VIXM) – VIXM is designed to match the performance of the S&P 500 VIX mid-term futures
  • Velocity Shares Daily 2x VIX Short Term (Symbol:  TVIX) – TVIX is designed to provide returns that are twice (2x) the daily performance of short-term S&P 500 VIX options
  • VelocityShares Daily 2x VIX Med (Symbol:  TVIZ)– TVIZ is designed to provide returns that are twice (2x) the daily performance of medium-term S&P 500 VIX options

How To Make Money Trading Stock Market Volatility When You Expect The VIX To Fall

The following are some of the short oriented volatility ETFs that are designed to increase in price as the VIX decreases in price.  All short oriented volatility ETFs are one to one ratio ETFs.

  • VelocityShares Daily Inverse VIX ST ETN (NYSE:  XIV) – XIV is designed to match the inverse (opposite) of the return of the S&P 500 VIX short-term futures
  • ProShares Short VIX Short Term (Symbol:  SVXY) – SVXY is designed to match the inverse (opposite) of the return of the S&P 500 VIX short-term futures 
  • iPath Inverse S&P 500 VIX Short (Symbol:  XXV) – XXV is designed to match the inverse (opposite) of the return of the S&P 500 VIX short-term futures
  • VelocityShares Daily Inverse VIX Mid-Term ETN (Symbol: ZIV) – ZIV is designed to match the inverse (opposite) of the return of the S&P 500 VIX medium-term futures  

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10 Tips for Trading Options


10 Tips for Trading Options

10 tips for trading optionsOptions are more complicated then trading stocks, but they offer much greater returns for investors. Once you get a good grasp on how options work you can really minimize your risk and create some explosive returns for your portfolio. The following 10 tips for trading options will help you get started down a path of success as an options trader.

1. Trade Liquid Options

Our first tip in our top 10 tips for trading options is to trade options that are liquidable. When trading options it’s very important to be able to close your position. This is especially true when you are new to trading options. Don’t make the mistake of buying an option that you cannot liquidate because there is no market for it. When looking at an option table look at the options with the most volume to help you determine if the particular option is liquid. Another tip for inexperienced traders is to buy and sell options for large companies such as Apple, Google, Ford, and General Electric because these will have a much bigger market than smaller companies.

2. Know The Expiration Date

Unlike stocks, options expire. If you are not aware of the expiration date then you can lose everything. There are several different expiration dates for options in todays market. It used to be the third Friday of every month. With today’s active market place and the rise of the internet (making trading easier and more convenient then ever before) options now have varying expiration dates. This is one of the first things you should look at, because its also used in determining the value of an option. All other things being equal an option loses value overtime as it nears its expiration (options that are not in the money).

3. The Bid/Ask Spread

The bid/ask spread will usually be much larger for options than for stocks. The market place is smaller and there is a lot of possibilities for each company, whereas they may only have 1 or 2 types of stocks. As a buyer you will not purchase the option for the price shown you will be buying it for the next closest asking price. As for sellers you will be selling to the next closest bid price. If you plan on purchasing or selling an option at market price then its important to be aware of the spread between the bid and the ask.

options trading tips price break

4. Know the Break-even Point

One of the most fundamental rules in business, not just trading options is knowing the break-even point. To calculate the break-even point for an option you need to figure out the premium for purchasing the option, the commission, and the amount the brokerage charges to buy or sell shares when the option is exercised.

Here is an example:
Lets say you want to purchase a call option with a strike price of $150. The premium you are paying for the right to purchase the option is $5.00. The brokerage house charges $1.00 for the options trade and $10 to purchase stock when the option is exercised. For this example the break even point would be $0.16 for every share of the option. Since options are traded in blocks of 100 and the total cost and fees of purchasing the option is $16 ($5.00 premium + $1.00 commission + $10.00 for exercising = 16) you would take 16 and divide it by 100 to get 16 cents per contract.

trading options choices

5. Hedge Your Risk

An options traders best friend is market volatility. When a market is highly volatile (large price swings) there is a lot of money to be made for options traders. Since options have an expiration they are much riskier than investing in stocks are bonds. One way to minimize this risk is to hedge. Let’s say the price of a particular stock is moving 10’s of dollars each day (positively and negatively) and you want to seize this opportunity to earn a lot of money really quickly by purchasing options. It can be hard to predict which way the price will go the next day, but one strategy you can use is a hedge. You can purchase a long and short position on the same stock. Since you can only lose a finite amount of money on the options (your initial investment) and the premiums are relatively small compared to the market swings if you purchase a call option and a short option the only thing you need to happen is to have the market move for you to make money.

Lets say the strike price of a call and put option is $50.00 and the premium for both is $1.00. Well you purchase a call and a put option and the next day the price of the stock goes to $60. Well you lost your $1.00 premium on the put option, but you made $10.00 per contract on the call option. In this instance you have hedged your risk and made a sizeable profit.

6. Trade Options on Stocks You Understand

Options are tied to the performance of a stock. Options give investors a chance to make a much larger return then purchasing or shorting a stock, but they also carry significantly more risk. As a new options trader it’s better to start trading options with companies you understand. Since the price of the companies stock will determine if the option is in the money or not it is a lot better for new options traders to invest in options on companies they have researched, owned previously, or have been watching.

7. Follow The Most Active Calls and Puts

For new options traders it is better to followed experienced traders. If you are looking at an options table and you notice a particular option has much more volume then the rest of the options on the table you know there is a lot of interest in this particular option. This can be a sign of a lot of faith in this particular option. One added benefit of a high volume option is it is also much easier to liquidate and there will be a much smaller bid/ask spread to get the price you want when you do close your position.

8. Learn To Cut Losses

cut losses with options tradingIn options you need to cut your losses before you lose everything. Options are a lot different than stocks, remember they have an expiration date. Normally. when you purchase a stock at $100 per share and the price falls to $60 per share you would invest more since you liked it at $100 and now its even cheaper. Many traders buy shares overtime so they get a lower average price per share. With options this can be extremely dangerous and lead to much bigger losses. Since options expire it may take to long for the stock price to climb back up and you could be in the whole a lot more money then you should. Also you lose everything when an option goes sour, with stocks you still get to hang onto the stock.

9. Dividends and Earnings Reports Impact Prices

One thing new options traders might miss is the effect of dividends and earnings reports. Since stock price is affected by these an options price will be as well. Dividends and positive earnings reports traditionally make stock prices rise and negative earnings reports make stock price fall. Knowing when the company is reporting its earnings and distributing dividends is very important before you enter into a position with an option.

10. Have plan

This is probably the most important step. Options can move fast and they can cost you a ton of money if you do not have a plan. Trading on emotion in general is never a good strategy, with options it can be lethal. Make a plan before you purchase an option and stick to the plan this will save you thousands of dollars over your career as an options trader.

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How to Trade Binary Options

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How To Trade Binary Options | What They Are

Binary OptionsWhile binary options are not particularly new to the world of online trading, they are growing more popular, which has a lot of individual investors wondering what they are and how to trade binary options.  The good news is that binary options trading is one of the easiest trading schemes available in the financial markets and is relatively easy to learn.  Binary options provide only two outcomes, which is why they are called binary.  They either hit their limit price at time of expiration and pay a predetermined amount of money or they fail to reach their limit price at time of expiration and the money used to buy the options is forfeited to the firm that orchestrates trading.  Due to their binary design of either paying the full payout or paying nothing at all, they are known by the moniker “all or nothing options”.

Binary options can be purchased that bet on the price at a specific future time of individual stocks, various exchange traded funds (ETFs), stock market indexes, commodities, and currencies, which depending upon the option could be hours, days, or weeks in the future.  If the financial product that a binary option is based on closes above the target (strike) price upon option expiration, the buyer of the option will be paid a percentage payout that is part of the options purchase agreement.  If it closes below the target price, then the option expires worthless.

Each binary options trading platform (website) has their own specific rules when an option matches the target price upon expiration, with some providing a full refund of the option purchase price and no payout, while others considering it to be an option that failed to exceed the target price and keep the money used to buy the option.  Binary options can be used to bet on either the long and short side of a financial product’s price movement.  Long meaning it is a bet that the underlying financial product will exceed the target price upon option expiration.  Short meaning it is a bet that the underlying financial product will be below the target price upon option expiration.

How Binary Options are Different From Traditional Options

Binary Options Currency
The word “options” is a daunting word for many individual investors, because options are thought of as complicated financial instruments that take a great deal of education to understand and a great deal of research to trade properly.  That is true of traditional options, which often require complicated trades to be set up to trade them effectively and successfully; however that is not the case with binary options.  Binary options trades are not complicated at all.  They are as easy as buying a stock, which is something all individual investors know how to do.

Traditional options allow a stock trader or investor to leverage their stock positions to maximize potential profits or to protect their stock positions by creating a hedge against an unexpected price moves.  While traditional options can be quite useful trading and hedging vehicles, their use is often quite complicated and beyond the understanding or usefulness of the average investor.  Binary options, on the other hand, do not allow leveraging or hedging stock positions, but rather allow a trader to make a simple bet that a stock or other financial product (i.e., ETF, stock index, commodity) will exceed a certain price either to the upside (long) or downside (short) by a specified time and date.

Casino games provide a good analogy to explain the difference between binary options and traditional options.  Sophisticated gamblers can play a casino game such as craps in many different ways using various betting strategies, some which are quite complicated.  The same is true of traditional options.  Whereas, craps also provides a very simple “all or nothing” bet in which a gambler bets the dice thrower will either be successful or will not be successful.  That is exactly how binary options are traded.  Traders place a bet that a financial product, such as a stock, will either be successful or not successful at exceeding a certain level at the time that the binary option expires.

An Example Regarding How Binary Options Are Traded

Put Call  Binary Options

The best way to grasp how binary options are traded is to take a look at an example of a binary options trade.

A trader might buy ten binary cash call options of a biotechnology company’s stock, such as Amgen Inc. (NASDAQ:  AMGN) in anticipation of a positive Food and Drug Administration (FDA) ruling expected the next afternoon.  The trade might cost the trader a total of $500 to buy ten binary cash call options with a strike price of $110 AMGN per share and an expiration at the close of trading the following trading day.  The trader would buy the options with an expectation that AMGN will close above $110 per share after the FDA ruling.

If the FDA ruling is positive and AMGN closes the next day above $110 per share, then the ten binary cash call options will pay the predetermined amount when the trade is executed.  For the purposes of this example, let’s say each of the ten binary cash call options pay $100 when AMGN closes above the $110 target price.  The trader would then collect $1,000 for the ten binary options.  Given the $500 they used to initiate the trade, they will have quickly doubled their money using binary options to bet that AMGN would close above $110 after the FDA ruling.  If AMGN closes below the $110 per share target price, then the ten binary cash call options would expire worthless, and the options buyer would lose the $500 that they spent buying the options.

A Word of Warning Regarding Binary Options Websites

There is no shortage of binary options trading websites that allow traders to trade a wide variety of binary options online.  However, not all of the sites are reputable.  They can be located anywhere in the world and may not be subject to regulatory oversight.  Therefore, it is very important for binary options traders to do their homework and only do business with binary options trading websites that have a good reputation.  Finding one that is located within the country that one lives and is subject to regulatory oversight is a good way to protect oneself from potential problems with using the services of a binary options trading website.

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Posted in OptionsComments Off on How to Trade Binary Options

How to Trade Options


What are Options?

how to trade options

Learning how to trade options is a pretty difficult concept to grasp. However, if you have a solid foundation and understanding of how to trade stocks, trading options can be a great way to maximize your investment.

An option gives the buyer the right, but not the obligation to buy or sell an asset on or before a certain date. An option is a legally binding contract between a writer and a holder. Options are considered more risky than investing in stocks, because they carry higher risk of losing your entire investment. However, options also give traders the opportunity to make much more then they could buying and selling stocks.
 

How Options Work

There are 2 types of options, calls and puts. There are also two people involved in an options contract an options writer and an options holder. The options writer is sells the contract to the options holder.

Call Options

If purchasing a call option your are long on an underlying asset. For instance, say you liked Apple’s business you think they are headed in the right direction and you want to maximize the return on your investment. An option gives you the choice to lock in Apples current stock price. On or before the option expires you have the right, but not the obligation to exercise the option. Apple is currently trading at (just for purposes of this example) $400.00 per share. When you are purchasing a call option you are expecting the share price of Apple’s stock to increase for over a certain period of time, say 3 months. Lets say during the coarse of the three months Apple’s stock shoots up to $1,000.00 per share with a call option you have the right to exercise the the option and buy Apple’s stock at $400.00 per share from the options writer. You can then turn around and sell Apples stock at market price of $1,000.00 per share. For this ability to lock in a certain price you pay a premium for the options contract. We will get to premiums in a little bit.

Put Options

how to trade call optionsA holder of a put option is short on a stock and expects the price of the stock to go down. Going back to our previous example this time you think Apple’s stock is going to fall. It’s currently trading at $400.00 per share so you decide to purchase a put options contract that expires in 3 months. With a put option you still have the right, but not the obligation to exercise the option. With a put option you are gaurenteed to sell Apples stock at $400.00 per share. Lets say during the 3 months Apple’s stock goes down to $100.00 per share. As a holder of the put option you are able to purchase Apple’s shares at $100.00 (current market price) and sell those shares back to the options writer for $400.00 per share. If Apple’s stock had gone up over the period you would not exercise the options and would lose the premium for purchase of the contract.
 

Understanding Options Contracts

Okay, by now we know that options give us a chance to lock in an asset at a certain price to either buy or sell that asset at a later period in time. Now we need to know what effects the value of an option. There are a few critical factors you need to look at when buying an option.
• Expiration date
• Strike price
• Premium

Premium

For the ability to lock in a price on an asset you are going to have to pay a premium. Options contracts come in lots and represent 100 shares of a stock. the factors the effect the premium are the strike price and the length of the contract.

Length of Contract

With an option the longer the contract the better chance you have of reaching your goals. Going back to the Apple example I used earlier. If you had one year to wait for Apple’s stock to increase as opposed to only 3 months, wouldn’t you be willing to pay more for that contract? The length of the contract has a big factor in the premium you are going to pay for the options contract. Similarly, as time moves on and an option moves closer to its expiration date the less valuable the option contract becomes.

Typical Lengths of Options Contracts:
• 3 month
• 6 month
• Leaps (a long term options contract lasting from 9 to 30 months)

Note: an option always expires on the Saturday immediately following the third Friday of the month. Also, An options contract does not have to be purchased (by an options holder) on the date it was written. An option holder can purchase options that are almost expired.

Strike Price

options table

Courtesy of Yahoo! Finance

The strike price is the agreed upon price between the options holder and the options writer of what the stock can be bought (call options) or sold (put options) at. If you look at an options table you will see a series of strike prices you can purchase an options contract at. How close the actual stock price is to the strike price is going to determine how much of a premium you are going to pay to purchase the contract. Going back to our Apple example lets say Apple is trading at $400.00 per share. You are looking to purchase a call option. There will be an options table that lists all the options that are currently available for Apple’s stock. As an example lets say there are 2 call options available one with a strike price of $200 and one with a strike price of $600.

At a current trading price of $400.00 per share the option with a $200.00 strike price is already in the money. This means if you bought this option you could theoretically turn around and force the options writer to sell you Apple’s stock at $200 per share and you can then sell the stock at the market price of $400.00 per share. Since this option is already in the money your premium for this contract will be very substantial because this options contract is already worth money. However, if you were to look at the premium for the option that has a strike price of $600.00 per share the premium will be very small because the market price is still $200.00 away from the strike price. In this case you would not want to exercise the option and buy the stock for $600.00 only to have to sell it at market price of $400.00 per share.

The strike price is the most confusing and toughest concept for new options traders to grasp. Still confused?

When you are purchasing a call option your goal is for the price of a stock to increase. Remember you always have time working against you as an options holder. The closer you get to the expiration date the less likely you have of your option becoming in the money. An option is said to be in the money when it has surpassed the strike price. For a call options holder they want the price of the stock to go above the strike price. For a put options holder they want the stock price to go below the strike price for the option to become in the money. Again, the strike price is the agreed upon price between the options holder and the options writer that the holder can choose to either purchase (call) or sell (put) the stock to the writer at the agreed upon strike price.
 

How to Trade Options

Trading options is similar to trading stocks. You first need to decided whether the company’s share price is going to increase or decrease. When you are trading options you are not actually buying or selling stock you are buying a contract for the right, but not the obligation to purchase or sell a stock at a determined price (strike price). Once you determined if you want to purchase a call option or put option you need to think about what strike price you want to lock in.

The closer the stock price is to being in the money, the more expensive the option premium will be. In the example above the $600.00 option would be very cheap, but since the $200.00 option is already in the money by $200.00 that option would be very expensive.

To learn more about how to determine the value of a stock versus its current market price click here. To learn more on when to know if its good to buy or sell a stock click here.

When you are trading options your contract is for a sum of 100 shares of stock. Whether it’s a put or call option the contract will be for 100 shares. It’s also a lot less expensive to purchase options then it would be to purchase the stock itself. Since an option is a derivative it does not have any value once the contract expires. If the option did not go into the money before the expiration date the option holder will lose all of his investment, because he will have lost the ability to purchase or sell stock at the agreed upon strike price.

When choosing a strike price you need to assess the risk you want to take. An option that is far away from being in the money will have a small premium, but the likelihood of you being able to cash in on that option is very small. Similarly a option that is close to being in the money is going to be very expensive, but the likelihood you will be able to cash in is substantially greater. As an options holder you need to determine a price you believe the stock could go to and that is how you can choose the best strike price for your investment needs.

Lastly,you do not necessarily have to exercise the option. You could also sell the option if it increases in value Or decreases), but you want to close out your position. As long as the option has not expired you can resell the option on the open market. This will not make you an options writer, however, you will close out your position on the options contract.

Note: you don’t actually have to buy and sell stocks. If you are using a broker or online broker you just have to exercise the option and the broker or online broker will do the purchasing and selling of the stock. Sometime people buy options so they can bet on a 100 shares of stock they otherwise could not afford. You don’t actually need money to purchase 100 shares of stock you just need to pay the options contract premium and the amount the broker charges you per options contract.

Being a options writer is significantly more difficult than being a options holder. Options writers also carry unlimited liability because a stock price could theoretically keep increasing. Learning how to be an options writer is above the scope of this article.
 

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Trading Binary Options: NADEX Review

As we originally covered the NADEX binary options trading platform last year, we felt it was time to revisit the platform to see how it has progressed in the last 11 months or so. At the time when we had done the initial review, NADEX was still generally new, giving us limited amount of information to work with. Now, let’s revisit NADEX to see what kind of reputation they have made themselves, and if it is worth it to sign-up. Before making your decision, take a look at what we have found.

nadex review logo

(Photo Credit to: TrainingPub.com)

What is NADEX?

nadex review

(Photo Credit to: Talkslive.com)

Formerly known as HedgeStreet, NADEX (North American Derivatives Exchange) emerged into the options market in 2010. It serves as a digital trading platform that facilitates trading in a number of financial derivatives, primarily in binary options. Consolidating both a derivatives clearing house (known as Derivatives Clearing Organization) as well as an exchange (Designated Contract Market) all onto one platform both NADEX and the binary options market has been continuously appealing to more and more traders. With their headquarters based in Chicago, IL NADEX is regulated by the US Commodities Futures Trading Commission. By being 100% web-based NADEX relieves you of having to purchase any type of software that you would have to install. This gives you the freedom of accessing your account from any computer or device with web-access. All data and information stream to your account in real-time, no need to click “Refresh” or hit “F5.” To make it even easier for traders, members simply have to login to their account and then have the ability to place orders directly into the exchange. This platform also gives you the ability to trade on various markets and indexes with limited risk.

How Do You Use NADEX?

In order to use NADEX, retail investors or traders simply open a trading account. This process usually takes less than five minutes and there is no fee or obligation required for those who sign up. Before beginning any type of trading you need to make an initial deposit of at least $100 in the form of a wire transfer, electronic check, or by mailing a paper check. Although the latter takes around five days to appear in the member’s account. Afterwards investors can deposit however much they like into their account (only dollar amounts) without worrying about any deposit fees. Your account must have enough though to at least cover the maximum potential loss of your trades in order to use NADEX successfully. Besides also offering investors a hands-on experiences with their Demo Account feature, NADEX gives all of their members with simple trading instruments and easy payout schedules allowing investors to trade with ease. Open to both American assets and the global market, NADEX provides investors with enough room to trade, sell, and purchase all on one consolidated-web-based platform.

(Photo Credit to: ForexMagnates.com)

(Photo Credit to: ForexMagnates.com)

Pros and Cons of NADEX

At this point in the NADEX review, let’s take a look at the pros and cons of this online trading platform. Even though everything has sounded easy enough so far, there has to be a couple of roadblocks, right? That is, unless NADEX is the perfect product… Which it is not. Take a look at the collection of pros and cons below.

Pros

  • 100% web based
  • Real-time information and data
  • Can easily review trading history and manage account
  • Easy to use for those familiar with binary trading options
  • No need for an intermediary broker Binary options available are constantly growing
  • Custom user interface
  • Provides numerous expiration choices for binary options ranging from one hour to one week.
  • Individual, personal, human-to-human customer support (within operation times)
Since launching it looks as though they've released smartphone apps as well! (Photo Credit to: Play.Google.com)

Since launching it looks as though they’ve released smartphone apps as well!
(Photo Credit to: Play.Google.com)

Cons

  • A collection of transaction fees per trade, considered high by industry standard
  • Website is not very user-friendly
  • Exclusive to U.S investors
  • No offered/mentioned bonuses
  • Not a suitable trading platform for beginners

Like the lists show above, the pros seem to outweigh the cons. Most of the other complaints or downsides that I have seen mentioned recently were from those who were not familiar with typical averages on binary options returns. Besides it being too complex for beginners, it seems that NADEX would be a great asset for any seasoned investor.

NADEX Review, Bottom Line

After looking at the pros and cons of this NADEX review, in addition to signing-up for a demo account to try it out, I would definitely say NADEX is a good platform for trading. Transparency is not something that all companies offer, however NADEX is upfront with everything including their transaction fees. With averages resulting in the same amount of returns as traditional binary options trading any intrigued investor should at least give NADEX a try. Who knows? The NADEX platform might be the answer to your success!

What did you think of our NADEX review? Will you be trying NADEX in the future? Why or why not?

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