How to use Binary Options
Posted On April 15, 2020
So what do savvy traders invest in when the financial market is moving sideways? Until recently the options where limited and traders would spend lots of money on bid offer spreads as the market chopped them up. The financial market can be really difficult if it is stationary and there is little impetus for it to move in one direction or another. But now, investors have a relatively new instrument available to any trader, called binary options which have an “all or nothing” payout. The method of trading binary options is simple and the payout is a fixed number. So when trading binary options, an investor just need the market to move slightly above the purchase or slightly below the sale price to receive an excellent return.
Historically, financial traders needed trends in the market to make a good return on an investment. In the world of binary options, small moves will create the same return as a large move. The concept is simple, if an investor places a trade using binary options by purchasing a call binary, a successful trade will be completed if the currency pair of choice is above the purchase level when the binary options option expires. It does not matter if the expiration price is 1 cent above the purchase price or $100 dollars above the purchase price, the investor will still receive a large percentage return on their investment when investing in binary options. As the market continues to chop up and down, the binary options trader will make excellent returns trading both call binary options and put binary options.
The market for binary options, which mainly include digital options and binary options, used to be only available to customers of large derivate desks. Currently binary options are available on Indexes, commodities, individual stocks and currencies. Trading in the binary options market is focused on Call and Put for binary options, which allow the individual to invest in above or below options. This market place creates options on multiple financial instruments and sets a specific time horizon when the option expires. The liquidity binary options are excellent and allow the investor around the clock access to the very profitable binary options market.
Trading any market requires experience and traders and investors should spend time analyzing the markets and instruments prior to risking capital to make returns. The binary markets represent an opportunity to develop specific strategies that require very little market movement to make excellent returns. Standard options strategies require a significant move for the buyer to make a return that is worthwhile. The binary options market, gives investors the capability to make a robust return with a very small market movement.
Traders and investors can employ a number of fundamental and technical strategies to make money in the binary options markets. Technical strategies that employ momentum or recognize specific price points where the market might turn are excellent when combining with the binary options market. Combining fundamental data such as earning releases are also excellent strategies to use when trading binary options. For example, imagine it is 10 minutes before the US Existing Home Sales number which is usually released at 10am EST. A trader believes that the number will be bullish for the US equity markets, but does not believe the market will sustain a large move. The trader just wants to bet that the market will move higher by a few S&P 500 Index points after the Existing Homes Sales number is released. The trader can purchase a Call binary S&P 500 index option, and if the number comes out as he/she expects, the market will move up and on expiration, (right after the number), the trader will be able to cash in and receive a large percentage payout.
There are numerous strategies that a trader can use to benefit from this style of trading. It is definitely worth while spending the time developing strategies to enhance your returns in this market.