I’ll admit at first the terminology seemed a little confusing. But after learning the basics binary options are actually pretty simple.
Here’s how they work.
Binary Options: What They Are
A binary option is a way of investing that focuses on the rise and fall of prices of assets, including stocks, commodities, and foreign exchange.
There are also different types of terminology you should know when it comes to binary options trading.
- Strike Price – for the call option a strike price is when the security can be bought. For put options the strike price is when securities can be sold.
- Call Option- a trader would place this if he believed the market was rising
- Put Option – a trader would place this if he believed the market was falling
Let’s look at different types of binary options.
High/Low Options
The most common and simple type of binary option is high/low.
With high/low options investor simply determine whether a specific asset is going to rise and fall within a specific time period.
If the investor is correct he wins a fixed amount of money. However, if he is wrong he stands to walk away with nothing.
One Touch Options
You have the chance to get higher returns with one touch options.
With this kind of trading you’re betting that the option is going to reach the strike price. If the option does reach or exceed the strike price you get a return.
Boundary Options
With boundary options you’re setting boundaries for a certain security.
You set a low boundary and a high boundary. If the security stays in your boundary then you get a return.
60 Second Options
A sixty second option works just like a high/low option only you have just sixty seconds to make your decision of whether a certain security will go high or low.
Conclusion
Investing in binary options can be profitable if you know what you’re doing. Just like any type of investment it will take a few tries to get the hang of it.