Many users are interested in binary options, which can be quick money. Subject to certain conditions on options, you can get additional income in a short period of time or even make it your main income.
What is an option?
In simple terms, an option is a certain type of trading in the financial market. Translation from Latin means "choice", "all or nothing." And indeed it is. In order to trade binary options, you need to select an instrument, and if several options, then several instruments. What it is? These are various assets that are used in the financial market, such as currency pairs, indices, metals, commodity assets (coffee, oil and others). And after the trader chooses an asset for himself, you can start trading.
Types of options
There are different types of options: call and put options. Trading binary options implies that a trader can sell or buy an asset. If he sells, then such sell options are called - put option. And if a trader buys an asset, then such purchase options are called a call. The price at which the option is sold or bought is always fixed. Binary options There are interest, currency, stock and commodity.
They are divided depending on the underlying assets:
1. Non-financial or commodity. Various commodities are used, such as coffee, cotton, gold, metals, oil and others.
2. Financial, this includes various stocks, indices, bonds and so on.
The put or call option may vary. The most common are European and American options. It is with these options that most traders work.
Put option - what is it?
This is such a binary option with which you can make a sale.
Brokers provide various conditions for the sale or purchase of options. For example, such as:
1. The time range. Any trader can choose the expiration time, which varies from a few seconds and can last for years. The most common ranges are medium-term intraday trading. Basically, traders buy options for a period of several minutes to several hours. Turbo options are common enough. It is on these types of BO that you can earn almost instantly. Selling a put option may take only a few seconds, depending on the expiration time. And since there are many such transactions in a day, it all depends on the free time of the trader, then with the correct forecast of the market direction, you can quickly and excellently earn. These types of binary options are popular with beginners.
2. Fixed interest rate. Any option, put or call, when buying or selling it, has a specific profit. Terms are negotiated by the broker. For each option, you can earn from 70 to 95% of the profit. Also, the loss is strictly fixed. That is, the trader will not be able to lose more than his bet. Thus, the losses and risks of losing the full deposit are limited.
Binary Options: An Example
How can I buy or sell an option? For example:
- The trader must choose an asset, that is, what it will trade with (currency pair, commodity, index).
- It is necessary to choose the direction in which direction the price movement will go. In other words, you need to decide and choose a put or call option.
- Set the desired bet.
- Choose the expiration time. Any time that the broker provides can be selected. Turbo options use a time of 30 seconds or more.
- Wait for the expiration time to end and get a result that will be immediately reflected.
This is a common binary options scheme. This is how a put or call option is purchased.
Option selection
How to choose an option to buy (call option) or to sell (put)? The choice of a trader depends on many factors. First of all, you need to understand what is happening in the financial market. Any trader, before making a purchase of any type of option, conducts an analytical forecast. He will know in which direction the market will move at the right time for him. This, of course, is only a forecast, no one can know the exact movement, not a single analyst. However, not a single professional will start working until he makes an analytical forecast. Many beginners do not know how to do this. In this case, you can use the ready-made analytics provided by the broker.
To make the right choice, you need to know not only the direction of market movement. You also need to decide which type of option is preferred for the trader, for example, European put option or American, European call option or American. In order to do this, you need to know the difference between them. There are options that allow the trader to partially refund the transaction if the binary option loses.
Bad deal
No matter how accurate the trader’s forecast, it is not always justified. Situations such as various “noises” and “interferences”, the release of important news and others occur on the market. Sometimes this leads to a reversal of the direction of movement of the financial market. This situation is very difficult to predict, so traders are trying to reduce their losses. One such method is insurance. For example, early closing of transactions or the return of a percentage of the rate is possible. In this case, the profitability of the option decreases, but there is the opportunity to return at least something, at least some part of the amount of the bet. Typically, such methods are used by inexperienced traders or newcomers not confident in their analytical forecast.
And this is quite justified, even though at the beginning the novice trader will earn less, but he will get the necessary skills and will be able to move to a higher level in the future. Financial markets are always a risk, so do not forget about it, and you need to limit these losses by any means.
