How to Trade Binary Options
Binary options have been around for a while now. More and more people are getting on to the binary options market in a bid to try and make some extra money and supplement their income. However, there are many people who are not on the binary option market. Most of these people are not on the platform majorly because they have no idea how to operate on the market.
So how do you trade in binary options ?
The basic idea behind binary options is that an individual, in this case a trader, seeks to determine the future value of an underlying asset and in response, buy out a contract to the effect. It is a market that relies majorly on speculation as to which direction the asset’s price is likely to move. As such, there is no need to buy shares or such other thing. In essence, it is a simple and efficient way to invest in the market when you have small amounts of money to invest and limited knowledge of the financial market. With your small budget and limited knowledge, this market provides you with the requisite tools to ensure that you continue to make profits on this market. This however does not mean that people with large pools of funds and vast experience cannot engage in this market.
To trade in the binary options market, you are required to choose a platform on which you will be making your trade. Once the platform is chosen, you then go ahead and choose the underlying asset that suits your needs. You will also be required to select an expiry time and a direction in which the value or price of the asset that you have chosen is expected to move. These are the major decisions that you have to make before you can begin trading on the market. The underlying asset in this case is the name given to what the option is deriving its value from. This means that the underlying asset can be anything from indices, stock options, gold, commodities like oil and currency pairs. The expiry time is the time you choose for the contract to expire or come to an end and it may be marked in hours, days, weeks or months. Being short term trades, the expiry time rarely exceeds one month. The general direction that the price of an asset moves can be up or down. If a trader believes the price will move up, he or she will buy a call option. On the other hand, if a trader believes that the price will move downwards, then he or she will buy a put option.
Options are considered to have expired in the money if the price at expiry of the contract is above the strike price. In the same vein, a contract is said to have expired out of the money is at the expiry time, the price of the asset is lower than that of the strike price.