Trading Binary Options

T RADING B INARY O PTIONS

www.ProfitableTradingTips.com

 A so called “all or none” approach to trading
options on stocks, commodities, or foreign
currency is trading binary options.

http://profitabletradingtips.com/trading-investing/trading-binary-options

 As with all other options trading the buyer of a
put or call in trading binary options limits his or
her risk to the price of the options contract.


 An attractive aspect of trading binary options is
that the reward can be substantially more than
when trading regular options contracts.


 Although technical analysis is essential for
profiting binary options trading many otherwise
profitable day trading strategies do not apply.


T RADING O PTIONS

 In a regular options contract the buyer of a call
contract purchases the right to purchase a stock,
commodity,


 or currency at the market price, called the strike
price, no matter how high that price might climb.


 He or she is under no obligation to do so.


 The seller of a call contract is paid for accepting
the risk that the price of the underlying equity
will climb significantly.


 He or she is obliged to honor the contract if the
buyer chooses to execute


 The buyer of a put contract pays for the right to
sell a stock, commodity, or currency at the strike
price no matter how low the price may fall.


 His or her risk is limited to the price of the
contract.


 The seller of a put contract is paid for assuming
the risk that the equity in question will fall
significantly in price causing huge losses.


 In the options business sellers make more money
than buyers over the long term.


 However, the risk of an occasion big loss is such
that options selling, or writing, is chiefly limited
to those with deep pockets.


H OW D OES T RADING B INARY
O PTIONS D IFFER F ROM T RADING
R EGULAR O PTIONS ?
 As a practical matter most options traders simply exit the contract
when they have made a profit or want to limit a loss


 They do so by executing the opposite trade.


 The gain in regular options trading is basically the
difference between the strike price and the
current market price.


 In trading binary options the cost of the contract
is the most that the buyer of an options contract
can lose.


 In trading binary options the buyer of an options
contract gains cash or the asset if his trade works
out correctly.


 But, there is no in between.


 In trading binary options the trader gains the
asset or cash or he gains nothing.


 Binary options are a possible way to profit from
the news in day trading due to the short time
frame of these contracts.


B INARY O PTIONS T IME
F RAME

 Trading binary options is a short term endeavor.


 One pays for the contract for a put or call.


 If the equity closes the hour as expected, the
trader makes money.


 If not, he loses his investment.


 Binary options traders cannot exit their trades
while in process.


 This type of trading requires very close attention
to the market and a strong skill set in technical
analysis.


 The major difference between trading binary
options and regular options is the all or none
aspect.


 This is not a manner of trading in which one
follows a stock, commodity, or currency, enters
and exits trades as deemed profitable.


 It is a means of profiting, hopefully, on one time
assessments of market conditions, without the
ability to exit the trade if conditions change in
process.


 For more insights and useful information about
trading stocks, commodities, currencies and
options, visit www.ProfitableTradingTips.com.


Trading Binary Options

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Trading Binary Options