Stock Investments Turning Simpler with Binary Options

Posted by Banco Binario on April 14th, 2016

Technology has been growing at a rapid pace. Advanced technology has provided more trading opportunities which are both easier and faster.

A derivative is a financial instrument whose value is derived from another entity.Futures and options represent two of the most common form of "Derivatives".

Options- An option gives the buyer the right, but not the obligation to buy or sell a certain asset at a specific price at any time during the life of the contract.

Futures- A futures contract gives the buyer the obligation to purchase a specific asset, and the seller to sell and deliver that asset at a specific future date.

Under traditional forms of investment, a trader makes speculations about the value of the asset by actually purchasing the asset. If the trader sells the asset back to the market whenever its value increases, then they're making a profit, and if they sell the asset back to the market when its value decreases, they lose money. An investor has to constantly view and be in touch with the market in order to be aware about the market volatility.

Binary options have become popular over the past few years. These are estimates of underlying asset performance during a given time frame. Under this actual purchase of asset is not required. The holder has no right to buy or sell the actual security. Holder has to wait till the expiry date. Binary Options Trading for Dummies are as follows-

1. Cash settled- Any contract has either a physical settlement or a cash settlement.The majority of binary options is cash settled, i.e. in case of any profit, is it is paid in cash.
2. Call/Put Option- If a trader predicts an increase in the price of the underlying security, then binary call option is exercised. If he predicts decrease in the price of the underlying security, then binary put option is exercised.
3. Exercise style- There are American style contracts and European style binary contacts. American style contracts allow the holder to exercise at any time during the term of the contract, while European style contracts are not as flexible, and holders of those contracts can only exercise at the point of expiration.

Binary options are normally found in two formats, 

Either cash or nothing- Trade is done on fixed amount, i.e. if an option expires 'in the money' then option holder will get fixed cash amount on which particular trade was entered into, if 'out of the money' then zero cash. 

Or asset or nothing -Trade is done on asset value, i.e. if an option expires 'in the money' then option holder will get amount equivalent to the market value of an underlying on which particular trade was entered on, if 'out of the money' then zero value. 

Binary trading brokers help to make clear and effective contracts. It is always advisable to consult professionals. Asignal is an email or SMS alert. Binary Options Trading Signals are even forwarded to make the trade easier.