Learn more about binary options

As a beginner you may question yourself about what binary options are and how they may help you to make money to supplement you income or turn into a full time occupation.

So what are binary options?

In the most general terms binary options are financial instruments, which come with 2 outcomes – either you win or lose a trade, and this simple rule makes binary options trading incredibly easy and profitable. The most common binary option type is a “high-low” or “call-put” option. If you manage to predict the direction of the asset price movement over a predetermined period of time, then get ready to enjoy the profit. Binary options brokers offer a fixed return to their clients, therefore you can foresee the possible risks and calculate your income. A trader who fails to predict the asset's price change loses his/her investment.

The algorithm for binary options trading is quite simple: if you believe that the asset is rising, then everything you need to do is to click “call” option, if it seems to you that the price of the asset is going down, then then you click “put”. For a “call” to make money, the price must be above the strike price at the expiry time. For a “put” to make money, the price must be below the strike price at the expiry time.

The simplicity of binary options enables you to earn money without being a professional trader at the same time it gives you the opportunity to experience trading with different assets such as currency pairs, stocks and commodities, but probably the best feature of this type of trading is that you can control the risks and know the payout and possible loss in advance.

Binary Options in Global Financial Markets

Binary options fall under the umbrella of exotic options but in the financial markets they are often referred to as digital options. While digital options are very simple to understand and trade, the calculations behind the pricing is sophisticated, and so they are considered exotic options.

Digital options are usually traded OTC (over the counter) across all assets in financial markets. They are more commonly used within the Forex and Interest markets. Recently numerous stock exchanges have produced listed digital options on selected stocks, commonly known as FRO (fixed return options). Today the CBOE offers fixed return options on S&P 500 and VIX. In addition, 20 stocks were listed on the AMEX in 2008.