When most people start trying to learn more about investing and trading, they eventually come across a mention of options. However, most people will quickly become discouraged as they try to learn, because unlike just regular buying and selling, options are significantly more complicated.
Buying and selling a stock or currency is easy. You buy some, and as the price goes up or down, you make or lose money. When you want to close your position, you just sell it. It’s easy and straightforward! If you buy a stock at $40, and then sell it at $44. You’ve just made $4 per share, so if you bought 50 shares, you made $200. The math is simple.
Options, on the other hand, are much more complicated.
Depending on the type of option, an option is either a right or an obligation to buy or sell a specific number of shares at a specific price on or by a specific date. The value of the option changes constantly depending on the price of the underlying symbol as well as the volatility of the market and also the amount of time left before the contract expires. You can make money buying options, which give you the right to buy or sell the underlying, or selling options, which gives you the obligation to buy or sell the underlying.
Some people are drawn to options because it is possible to make a lot of money very quickly under the right circumstances, but it is also possible to lose a lot of money in a short period of time, too.
Fortunately, there is another type of option that is significantly less confusing for the beginning trader: binary options.
Binary options remove all of the confusion from options trading. Indeed, before you even purchase the binary option, you will know exactly how much you stand to win or lose!
A binary option works like this:
Say you are trading currency and you think that as of a specific date or time, the price will be above a certain price. You can buy a binary option for that price that expires at that certain time, and when it expires, if price is actually above that level, you get paid. If not, you don’t. There’s no guesswork, no confusing formulas, and no unexpected price jumps. In fact, all the calculations are taken care of by your broker beforehand. All you do is pick a price, decide if you think price is going to be above or below that price as of a specific time, and select the appropriate option.
