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Options and Binary Options

Options Analysis

An Option is an order to buy or sell a certain number of selected market asset at a specified price within a specified period.

The order to buy is called a Call, and to sell – Put.

In terms of expiration the options are divided into:

  • American – are carried out at any time prior to the date of expiration;

  • European – are realized in the last day of the period of validity;

  • Quasi-American – are performed in one of the previously agreed dates.

Options also vary by asset type and are:

  • equity;

  • commodity;

  • index;

  • futures;

  • the interest rate;

  • securities.

 The first options appeared three century ago in the Netherlands in the flowers market. Bulk option trading on the stock exchange has become relevant only in 1973 with the opening of the famous Chicago Board Options Exchange.

 

Differences

 

Binary options (BO) are contracts (orders) with fixed profit and different expiration period. If the classic options have the monthly expiry date, the expiry dates of BO can range from 1 minute to 1 year. One may start using this more affordable and flexible trading tool on any computer via special trading platform installed on it. It is the accessibility and ease of use of BO that has built them to the rank of one of the most popular ways to get financial income.

 

How one learn to trade in BO

Leaving the classical options in the stock market, and understanding the concept of BO, we have to find out how to use them to trade profitably. Let’s set a number of questions that allow us to answer this important Q:

What is a trading system for BO?

What is OTC on BO?

What is automated trading software for BO?

What is hedging?

How to set the Stop-Loss and Take-Profit on BO?

Affiliate Program: Additional passive income or free advertising broker?

 

The use of trading systems for BO

Which trading systems you may use on your broker’s platform depends on the choice of strategy. Trading System is a set of technical indicators, oscillators and signals that the trader operates on a price chart of an asset.

 

The best time to trade BO

It is believed that recommended time for trading on an asset is a period when the asset price is the most volatile. When knowing the global trading sessions working hours, it is not difficult to predict a particular asset activity increase.

 

OTC on BO

OTC (over the counter) is the OTC time when market quotes are not available, since the main suppliers of quotes are not working during this period. OTC time is Saturday and Sunday. However, some binary brokers continue to trade, even at the weekend, giving its traders the opportunity to earn. Such bids are called OTC.

 

Binary robots

As the foreign exchange market, BO allows to use robots that trade independently at a certain setting. The efficiency of such systems is not high, because as the examples show, they require constant tuning during operation and, therefore, lose their attractiveness as a machine that should earn while you relax.

 

The Hedging

The Hedging is the process of opening the counter transaction to re-insure assets in reversal trend. If you are lucky, and the price falls into the corridor – the profit will double, and if not – the loss will be much less. The main rule of hedging on the currency and equity markets – do not open several multidirectional transactions for one asset, otherwise the process could become irreversible.

 

Stop Loss and Take Profit

Stop Loss in binary trading is called Loss Limitation. This mechanism allows you to close the deal automatically, if the asset value falls below the set level. Take Profit allows the trader to adjust the level of profit, and automatically close the order, if the price of the asset exceeds the value. Not every binary broker offers this option, you should pay attention on this when choosing a company for cooperation.

 

Affiliate Program

Every major broker in the foreign exchange and stock market offers its customers the possibility of passive earnings by attracting investments of other traders on their trading platform. Profit, which the trader receives from such activity is usually set in percentage terms to the size of investments or to the volume of transactions carried out by the attracted trader.

 

Summary

In contrast to the classic version, Binary Options have appeared not so long ago, but due to theirs availability and ease they quickly gained popularity among traders. Wide functionality of this modern innovative financial instrument offers a great opportunity to get a stable profit. If you are stubborn and able to apply you knowledge in practice, know how to control yourself and never rest on your laurels, binary options – your way to success.