Trading Binary Options -FAQ, Strategies, and Rules
Binary options or digital options are commercial instruments that are traded during an agreed period of time with a pre-fixed return. Binary Options provide only two possible outcomes. Either you're in-the-money or you're out-of-the-money. A trader can profit by just predicting the direction of a price trend. No matter if the price of an asset has moved 10 pips or 50 pips -and either in case of a call option or a put option- the profit potential remains always the same. Every binary option that ends in-the-money offers a fixed payout. Usually, binary options offer Payouts 70-80%. Furthermore, binary brokers offer usually a refund 5-15% in case of an out-of-the-money option.
Trading binary options are simpler than standard options as fewer factors affect their pricing. Opposite to standard options, binary options offer specific payouts based on small moves of a financial instrument.
Which are the Underlying Assets?
The underlying assets of the binary options include stocks, indices, bonds, Forex currencies, and several commodities. Gold, Oil, and EUR/USD are the most popular assets in binary options trading.
How Are Binary Option Priced?
Binary options contracts are priced in a similar way as standard options. Traders in order to determine if there is value in buying a put or a call binary option they must evaluate three factors:
i) strike price
ii) underlying price of the financial instrument
iii) implied volatility of the underlying instrument
