One of the greatest things about dealing in the market (stock, shares, currency or otherwise) is the fact that they are replete with choices and instruments which have the potential of doubling the income that could be earned by following more conventional methods. While seeking one’s fortune out there, an individual should be very clear with regards to a particular thing: you might want to take advantage of magnified instruments in order to improve the chances of obtaining more returns. And one of those instruments is named “options”. So, what are options and what do you mean by “options trading”? Options trading is a type of trading where a person can exercise either the call (sell or pull (buy)) choice on or before a previously-agreed date. Options are of various kinds: American, European, Exchange traded, Over-the-counter, by Expiration, by Underlying Security, Employee Stock, Cash Settled etc. There’s one other kind of option here: Binary Options trading.
So, what exactly are binary options? It’s a variety of financial derivative which pays the trader in either a previously agreed-upon amount of cash or the price of an underlying asset. There are two primary types of options: the first one is cash-or-nothing, while the second one is asset-or-nothing. To learn how binary options work, it is important for you to understand that it is a kind of gamble. Here, the trader basically places a ‘bet’ on the price of an asset (which can be a commodity, a currency pair, a stock or a share) on whether it would increase or decrease on or before a particular period of time. In case the prices show a chance to go upward, then the trader normally buys the option, and if it is the reverse, they sell it. This usually sounds like gambling since, as said before already, binary options are usually ‘something or nothing at all’. This essentially signifies that you either get the promised amount or nothing at all. This, as can be easily understood, poses a huge risk to people and hence the chances of minting a profit out of it are highly dicey. But still, it is always the characteristic of the brave to undertake risks. Below are listed a few reasons why it is wise to trade binary options:
First and foremost, when you trade options, you get a wide selection to trade. The more you come to learn about trading options, the more you realise that there are a huge number of things that can be traded in the market. There are things such as commodities, currencies, shares, stocks etc. The more you learn, the greater efficiency you achieve at diversifying your portfolio and offsetting any possible losses that might be occurring. In today’s world, a majority of brokerages offer free accounts to trade with. So, this would mean that a majority of people would be permitted to put money into accounts to be put directly into the trade. Thus, you’ll be able to use your money in the exact way you please. The risks and rewards are always known. Since in binary options trading, it doesn’t really matter whether the market is going long or short (because all you need to check is whether or not the prices are closing at the desired levels on a particular date). There is absolutely no risk of leverage costing you more than you are going to spend. The amount you invest here is the only thing that you’re risking. This is certainly one of the biggest primary advantages of binary options. Although it is usually thought that binary options produce greater payouts when compared with other investments and are hence riskier compared to others, it is no longer so in today’s world. The reason being, most brokerages offer a percentage of the money you invest; if you should lose. So, the risks are mitigated to some extent. These, quite simply, are among the greatest advantages of trading binary options.