Hire A Qualified Binary Options Broker Before Getting Started

In case you are new to the investment game and would like to try binary option trading, the first thing you need to do is learn all about it. Just what is binary option trading? In simple terms, a binary option is when a trader buys a contract on an underlying asset and tries to forecast whether the value of the asset will increase or decrease over the life of the contract. If the asset’s value increases at the end, you place yourself “in the money”. Likewise, if the value decreases, you are “out of the money”.

How it works

This is an example of a binary options trading scenario. In case you are an online trader, the first thing you do is go to an options broker website. Once you are there, select an asset that you are interested in. After finding the contract on that particular asset, you purchase either a “call” or a “put”.

When you purchase a call, you believe the asset will end higher. A put, on the other hand, is a viable option when you think the asset will end lower. The majority of binary option trading has an initial starting length of one hour. You can secure option contracts up to 5 to 15 minutes before they expire, but most start at one hour in length. Within that one hour window, your asset will fluctuate up and down in price. This has no relevance whatsoever. The only thing that is of concern is the asset’s actual value at the contract’s expiration.

The end result

Once the contract expires and your guess is correct, you are “in the money”. Return on investment for binary options vary between 150% up to 185% of the initial investment. Here is an example of this outcome.

You purchase a $500 call contract on a new tech company at $85 per share. The maturity date is one hour with a 160% payout. If the tech company sits at $86 at the expiration of the contract, this is considered in the money and you get a return of $800. For any everyday trader, this is an exciting proposition. You get a $300 return on your investment in just one hour.

While the rewards of binary option trading are great, there is also great risk involved. This is why you need to research carefully in order to make educated investment decisions. You could also wind up on the losing side with nothing to show for.

Find the right options broker

Being successful in this type of investment venture is not hard. You just need to get the advice of an experienced options broker. This is someone who has a college degree or a sufficient background in finance. Always go with someone who is not just knowledgeable with terms but also with the ins and outs of this investment.

Duties of an options broker include providing investment advice and interest-bearing accounts. His or her main role is to act as the bridge between you and the market. The first thing a broker can do is to help you figure out the best option to invest in. Once this is over, the broker will transfer your order to securities exchange.

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