10 questions about binary options

10 QUESTIONS ABOUT BINARY OPTIONS

What is Binary Options?

Binary Options is a betting about how a asset will perform (up or down) in a given time frame. Usually from 60 sec and up to a day. In Binary Options you play/trade on the market movement’s.
Example: The position of the EUR/USD at the time you bet is 1.0907( 1 EUR = 1.0907 USD) You think that the EUR will go stronger, so you bet up (Call). If you think the USD will go stronger then you bet down(Put). After 5 min (We say that was the time you chosen) the position is 1.0908 or higher. If you bet on up you win but if you bet on down then you lose.
Let’s say you bet $25 on up, and the win rate was 75% then you would get back $43,75 that means you won $18,75 if you had lost then you would have lose $25

If however it ends at the same position as when you started then you just get back your money.
What assets can be traded as Binary Options?

The most brokers have a wide variety of binary contracts that their traders can trade with.

• FOREX Combinations of currencies such as EUR/USD, EUR/CHF, EUR/AUD, EUR/GBP, USD/CHF, USD/JPY and many more.
• INDICES Here you can trade on how the markets will move such as Nasdaq, Dow Jones, FTSE, Nikkei, S&P 500, DAX and many more.
• COMMODITIES The most common commodities you can trade on are Gold, Silver, Oil, Sugar, and Coffee. But some brokers have a lot more.
• STOCKS In stocks you also have a huge variety of companies that can be traded with. Some of the most usual is: Apple, Amazon, Coca Cola, Google, Facebook, BP, Santander, Citygroup, and MorganStanly.

What is a Call Option?

An option is an opportunity for the owner to buy a certain number of shares of an underlying asset at a given price, (strike price) by a given date (expiration date). So where does the Call come in? A Call Option is given that name because of the owner`s right of “calling” the stock away from the seller. He has the “right” not an obligation to buy it. So a Call option predicts that the assets marked value would be higher at the closing time than what it was at the time you started the trade.

What is a Put Option?

Simply: Put Option is the opposite of Call Option

It is an option for the owner to sell a certain number of shares of an underlying asset at a given price, (strike price) by a given date (expiration date). And the Put Option is named so because of the owner`s right to “putting” (sell) the stock to someone else. So a Put option predicts that the assets marked value would be lower at the closing time than what it was at the time you started the trade.

How do I trade FOREX Binary Option?

FOREX stands for “Foreign Exchange” and it shows the strength or weakness between pair of currencies. If you as a trader has Euro and want to sell that to buy Dollar, then this transaction would weaken the Euro and strengthen the Dollar or the opposite if he sells Dollar to buy Euro and if several traders do the same or the one trade is big enough then the rate between Euro and Dollar will change, and it is this change you are trying to predict if go’s up or down. Simply said, your goal as a trader is to predict correctly which direction the change of rate will go in order to make profit.

How do I trade Commodity Binary Option?

The trade for Commodity is mainly the same as for FOREX, the only change is that instead of trading in the value change between pairs as in FOREX, you here trade in the value of one commodity. For instance if you decide to trade in Gold, and you think that the price of gold will rise the next 5 minutes then you buy a “call” trade at the price of $ 1096,285 per ounce, and at the end of your 5 min time frame the price of gold is $ 1096,286 then you will win.

How do I trade Stock Binary Option?

The trading in Stock options is mainly as both FOREX and Commodity trading, it allows us to take benefit of an uptrend (Call option), or a downtrend (Put Option).

An example:

Let’s say that you got information that Apple is going to announce the new iPhone 51 today. If we then take a brief look at the history about what usually happens when Apple make this announcement’s. The typical is that the Apple stock makes a move upwards the first hours after these announcements. How can you so use this information to your benefit in the Binary Option trading? Just after Apple actually have made their announcement you go in to your broker and buy a Call Option of Apple, and if the stock value rises within the time frame you set, then you win and if its goes down …..

Where can I learn how to trade?

If you want to learn and experience how it works a lot of brokers have the ability to open a Demo Account. Here you can perform trades with live data but without investing any money. This is a great way to get the feeling with how it works.

How much do I have to invest?

This is different from broker to broker. Some brokers have set the limit as low as $ 10 others $ 50 and some even $1000. Mostly it is between $ 50 to $ 250.

Can I make money with Binary Options?

The simple answer is YES YOU CAN, BUT!!!!!! There is a big but, you can also lose all the money that you invest. The thumb rule is that you never invest more than 5% of your assets in one trade.

This means that if you have $ 500 in total assets at your account then you can use $ 25 for each trade.

I was inspired to write this blog after reading Saras blog: Can you make money with Binary Options?