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The purpose of this guide is to show you how to make money trading Binary Options. In
the first several chapters we will deal with the in and outs of binary options while later on
we will go into the strategies needed to achieve success in trading binaries.
So what are Binary Options (also referred to as ‘digital options’, ‘fixed return options’
and ‘all-or-nothing options’)?
A binary option is In fact a prediction of which direction the price of the underlying asset
(a stock, commodity, index or currency) will move by a specified expiration time. With
Binary Options, an investor doesn’t purchase the asset – he is merely predicting the
direction that the underlying asset moves. There are actually just two possible
outcomes. A fixed gain if the option expires “in the money”, or a fixed loss if the option
expires “out of the money.” The price of the asset is not important. The only thing that is
matter is whether the prediction is correct or incorrect.
A binary options trade usably involved three steps:
First, you choose a trade expiration time, this is the time you want the trade to end. It
could be any time period between a minute and a week – usably it is within the day.
Second, you choose Call or Put. If you think the price will end up above the current
price: you click the buy/call button. If you think the price will end up below the current
price: click the sell/put button.
Now that the trade is placed, you simply wait for the outcome. If the trade expires ‘in the
money’, you make a profit. If it expires ‘out of the money’ , you’ll lose.
Now you can see where the “binary” comes from, it stresses the fact that there are two
possible outcomes to a binary option, both of which are set and understood by the
investor prior to placing a trade.
Now here is an example:
You purchase a Google binary option for $25, with the opinion that within 2 hours
Google’s shares will be higher than they currently stand. If you are correct you get a
previously set percentage return on your investment (e.g. 82%), should the shares go
lower you lose your investment (some brokers will give you back a small amount as a
“refund”).
A number of factors distinguish binary options from regular stock options.
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