What Are Binary Options?

Traders know that binary options are an easy and effective way to trade price fluctuations in many different worldwide markets. However, traders need to take in account the pros and cons that binary options entail. When one trades binary options, they will find that there a few things they should consider. Different binary options have varying payouts, costs, and uncertainties involved. Binary options are basically options where a holder can receive a set amount of money, or no money at all if the option expires out of the money. There are only two choices to choose from, yes or no.

Why Binary Options?

Binary options are appealing to investors because they are simple. All the investor has to do is to make a guess if an event will occur, or if it won’t. Binary options can be as simple as waiting to check if a certain company’s share price will rise by ‘x’ amount, on a certain date, and at a certain time. If that share price happens to rise during that time, the option is automatically exercised, and the holder gets a certain amount of cash. Binary options aren’t that complicated, though, binary options trading is a great way for any novice to get their feet wet in the financial markets.

How to Trade

Anyone looking to trade binary options can trade on Nadex, or the North American Derivatives Exchange. Here, traders will be able to sell and buy binary options on the exchange without having to use a broker. Nadex is the first regulated United States exchange for binary options. There is no risk of losing money if a counterparty finds anything difficult when trying to meet with the expectations of any transaction as well. All trades are done while on the exchange and Nadex clears and guarantees all of the trades, too. Any funds Nadex members receive are held in separated United States bank accounts.

The Pros and Cons of Binary Options Trading

There are many advantages and disadvantages when dealing with binary options trading. On the Wall Street stock market or the forex markets, price gaps and slippage might sometimes arise. In the case of binary options, the risk is limited. When trading, it’s impossible to lose more than the initial cost of the trade. Traders might also find that they’ll get great returns when dealing with low activity markets. In lesser known markets, it’s difficult to make money with a stock index or forex pair. In the case of binary options, traders are able to see guaranteed results.

In Summation

Essentially, binary options are simple options with two conditions: yes or no. How much money one is able to make and lose is all determined by the buy or sell price, and if an option is worth $100 or $0 if it expires. The risk and reward both have a ceiling. This means that the ability to exit an option as needed before it expires in order to net a profit or prevent a loss is always available to the trader. Though binary options are simple in concept, they are not necessarily easy to make money with. Traders have to keep in mind that they should only trade with expendable capital. It’s always a wise idea to have some practice with binary options before investing any serious capital.