Having known what "Options" are all about, it will be
wiser to take a look at what binary options are too.
With Binary Option, it’s all or nothing, you’re either right or you’re wrong.
That’s it!
The name binary option may sound too difficult especially
for newbie, but it is a simpler way to trade than normal currency market.
Just like normal traditional options, Binary options have
three significant characteristics you must know. There must be;
A Premium (Risked Capital),
A Strike Price (Price at which you enter or targeted at),
and
An Expiration Period
The only difference you can see here is that, with binary
options, the amount for the option (Premium) is chosen by the trader but in
traditional option, it is usually determined by the market.
Secondly, the expiration time frames or range in binary
options are much shorter (From less than a minute to some days). But
traditional options have an expiration time ranging from a week to even some
couple of years.
These changes bring a very big difference between the duos.
Moreover, the profits are calculated based on these factors too.
How Binary Option Work.
With binary options, the broker will definitely pay out a
percentage of the premium risked if a trader met certain conditions placed on
the underlying asset at an expiry time.
That’s to say for example if the market price of the asset
you chose to trade is at or beyond your target strike at expiration period
supposing you placed a call option. You will receive a fixed profit regardless
of how far the price move in favor of your prediction. If the market moves 1
pip or 500 0r even 1000 pips, it’s the same amount of profit payout assuming
all traders risked the same amount.
Profits are usually calculated as a percentage of the
Premium.
I think this is why binary options are also called
"all-or-nothing" options. You win by 1pip, you win all and if you
lose by 1pip, you lose all. No question asked!
Let's take a look with example on how you can Make Money with Binary Options.
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