A Short Introduction to Binary Options

30 Jun

A binary option is a form of investment where the investor profits or forfeits his investments depending on whether or not he or she picks the correct outcome in a venture. In options trading, like on 24option.com, the asset that is most commonly involved is a stock market instrument – typically a stock, a commodity, an index, or a forex pair – that trades in real-time so the asset value fluctuates according to the prevailing market demand. Option trading, therefore, is a game of whether or not an asset meets the investor’s expectations. If it does, a profit can be realized; conversely, the investor losses all of his money if an asset performs differently than expected.

To understand how this works in real life, let’s take a specific asset as an example. Suppose you are an options investor and you are tracking the progress of the Google stock. At 10AM, the price was performing at $35.2 per share and you execute an option stating that the price will go up for the next hour; this is also known as a “call option.” If at the expiry of the option one hour after the asset price is indeed above the strike price (or the price at the time the option was executed), then the investor gets the payout of up to 85% in some cases. Conversely, if the stock dips below the strike price after one hour, the investor ends up with nothing to show for the venture.

The attractiveness of options investing essentially lies in the fact that investors can realize significant rewards in such a short period of time. Most stock market assets take time to grow. In particular, stock trading requires years before an investor can see credible gains in his initial investment; not so with options trading. Within a matter of hours, you can quickly turn a $100 initial investment into $1,000 if you make the right ventures.

Conversely, investors must also realize that this leaves plenty of room for concern. If you string together trades that are on the losing end, you can end up with nothing after a trading day. Unlike stocks where you may lose some over time, you are sure that the stock units remain yours and will continue to hold value with the potential to re-group and earn. This kind of risk is inherent in the nature of options investing.

The message is to be careful when making binary options ventures. Before making any venture, check that you have some level of basis as to how an asset will perform. Also take the time to learn some helpful options trading strategies so you can manage the risks accordingly.

Binary options investing is attractive but it does not come without risks. Familiarize yourself with these risks before considering options investing as a serious component of your investment strategy.

7 Responses to “A Short Introduction to Binary Options”

  1. Cornelius February 18, 2013 at 12:22 pm #

    does earnings produced in the stock exchange get taxed identical to the earnings I make at the office? I know of the long-term capital gains stuff but what else.

    Will it appear income tax bracket I am in regarding just how much it will get taxed? Must i pay condition tax, social security etc??

    Say I Make a hundred dollars within the stock exchange and that i was at a 25% income tax bracket and got the hundred I made before annually what can I have?

    so wait basically buy 1000 dollars price of stock and also the cost from the stock increases to provide me 1200 dollars price of stock in the finish of the season they tax it even when my money’s still committed to the stock? How can they differentiate this profit from a temporary and long-term gain then?

    “Returns are tax at the normal income tax bracket, aside from qualified returns, that are taxed at more 15% (5% for individuals in 10% or 15% bracket), and you spend federal and condition tax, although not social security or medicare insurance tax.”

    therefore if I made a hundred dollars within the stock exchange in more than a year I’d get taxed 15% + federal tax of 25% + condition tax? Is the fact that right? that eventually ends up being over 40% from the earnings likely to taxes.

  2. Ben February 22, 2013 at 4:03 am #

    And So I would love to understand so how exactly does the stock exchange influence your quality of existence or simply a lot of people. What exactly are some negatifs plus some positifs results of stocks within our lives? Any answer welcomed~~!

    THANKS a lot!

  3. Doyle March 19, 2013 at 10:02 pm #

    Korean stock exchange is extremely associated with US stock exchange. Because of subprime home loan, Korean stock exchange got broken a great deal. Since subprime home loan, I’ve been thinking about this for such a long time time. Please let me know how Korean stock exchange stay independent from US stock exchange.

  4. Aretha March 31, 2013 at 12:40 pm #

    I already browse the book. My subject is the reason for the stock exchange crash of 1929. However i don’t how it’s associated with it. Any useful advices could be appreciated.

  5. Brandon April 23, 2013 at 2:30 am #

    Searching for good options buying and selling methods. Thnx.

  6. Chanel April 25, 2013 at 6:07 pm #

    And who’d you say is the greatest options buying and selling expert?

  7. Star April 28, 2013 at 9:06 pm #

    What binary options buying and selling platforms can be found that trade using daily, weekly, monthly steps?

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