Stock Options Trading
Posted by admin in stock options trading on August 11th, 2009
Stock represents what a company is worth were they to sell off everything they own i.e. stock is their assets and their profits. It also helps determine a company’s value in the market place.
A stock option is when a buyer purchases either a call or a put option in the stock of a selected company. For example, Buyer A may believe that the performance of Company B is improving and may therefore decide to purchase a call option in the stocks of Company B. If the option expires above its strike price i.e. if the price of Company B’s stocks have risen, then Buyer A will profit from buying the option at its earlier lower price.
There are different types of options available, stock options being just one of them. Buyers may also trade commodity options, index options and currency (or forex) options. See anyoption™ for a list of stocks available for online investment.
Since a stock option is a type of binary option, there are 2 possible outcomes possible, all which are known at the onset of the contract.
The possible outcomes are: the option expires in-the-money and the buyer receives their investment amount back plus the return rate (with anyoption™ it’s between 61%-71%); or the option expires out-of-the-money and the owner receives nothing (however, on the anyoption™ platform, an owner receives 15% back if his option expires out-of-the-money). If the option expires at exactly the same level as the strike price and the investment is paid back in full to the buyer.
A main advantage of stock option trading online versus traditional stock trading, is that with a stock option, the payout is independent of the magnitude by which the price of the stock moves. For example, a buyer may purchase a call option for ?100, expiring at the end of the hour, for a return of 70% on the stock of Company B, currently at 165.896 points.
If at the end of the day, the stock ends at 165.897 then the option has expired in-the-money and the owner will receive ?170. He will receive the full 70% payout, even though the stock only moved 0.001 points. This demonstrates the simplicity of trading stock options.
Forex Options Trading
Posted by admin in Forex Options Trading on August 11th, 2009
Forex (fx) is an acronym of Foreign Exchange. Forex Trading is when currencies from different countries are traded against each other.
In traditional forex trading (or currency trading) actual currencies are bought and sold. However, in forex options trading, the buyer purchases the option not the currency i.e. they are entering into a contract to buy currencies at a fixed price within a pre-determined time frame.
A forex option is a type of binary option which means both outcomes are realized when the contract is created. If the potential gain and the potential loss from the trade are known from the onset, then it makes the trade totally transparent.
In a binary option trade there are only two possible outcomes: or the option expires in-the-money and the buyer receives a fixed amount of cash; or the option expires out-of-the-money and the buyer receives nothing. However, if forex option trading is carried out on the anyoption™ platform, an option expires out-of-the-money, then a buyer receives a 15% back of his initial online investment.
In forex option trading the underlying asset being traded is a currency pair e.g. EUR/GBP, AUD/USD, USD/JPY, GBP/JPY plus many more.
When placing an online investment, the result is independent of the magnitude by which the price change of the currencies relative to one another. For example, a buyer may purchase a call option for ?100 on USD/JPY currently at 97.1563, with an expiry time of the end of the week, for a return of 70%.
If at the end of the week, the currency pair ends at 97.1564 then the option has expired in-the-money and the owner will receive ?170. Even though the stock has only moved 0.001 points, they will still receive the full 70% payout. This makes forex option trading an attractive method of trading for many new investors.
Once an exclusive industry, forex option trading is now available to everyone. Since all risks are known from the onset and due to the comfort of online trading, many buyers are turning to online investments, specifically option trading, to purchase their trades.
Binary Options Trading
Posted by admin in binary options trading on August 11th, 2009
A binary option is a fixed return option since only 2 outcomes are possible, both of which are known at the onset of the contract – hence all risks can be fully taken into account.
A binary option is a contract which gives the buyer (known as the owner) the right, but not the obligation, to buy or sell an underlying asset at a fixed price within a specified time frame.
The underlying assets being traded could be currency pairs (e.g. USD/GBP), commodities (e.g. Silver, Copper), stocks (e.g. Apple, Vodaphone) or indices (e.g. Dow Jones, Nasdaq). The strike price is the industry name for the fixed price at which the asset is bought.
When trading binary options, the buyer must decide whether he thinks the chosen underlying asset will hit the strike price by the selected expiry time. The expiry time can be at the end of the nearest hour, or the end of the day, end of the week or end of the month.
There are 3 aspects involved in placing a binary option trade: selection of the asset, selection of the expiry time/date and selection of the direction the asset will move in.
If the buyer believes that at this chosen expiry time, his binary option trade will be higher than its current price, then he purchases a call option. If the buyer believes that at this chosen expiry time, his binary option trade will be lower than its current price, then he purchases a put option.
The returns from binary option trades are known once the contract is made. If an option expires in-the-money then a buyer will receive between 65-71% profit on the investment amount. If an option expires out-of-the-money then with anyoption™, the buyer will receive a 15% payback on his initial investment. The controlled risks with binary option trading makes it a preferred method of trading for many investors because the potential gain or loss is known from the offset, so all possible situations can be planned and accounted for.
With the development of the internet, binary option trading has expanded to online platforms. This means that a buyer can purchase binary options from the comfort of his own home, without the need for a broker. Using the anyoption™ platform, a buyer can follow the market trend of an asset and see all his past and current investments in a clear fashion.
In this respect, trading binary options online is extremely flexible. The asset, expiry time and predicted asset direction can be controlled by the owner of the investment who can tailor make the option to suit his needs and knowledge. The only unknown factor is whether the asset will expire above or below its strike price.
Options Trading
Posted by admin in Options Trading on August 11th, 2009
An option is a contract which gives the buyer (also known as the owner) the right, but not the obligation, to buy or sell an underlying asset, at a set price within a specified time frame.
The underlying asset could be a currency (such as GBP/EUR), stock (such as Microsoft shares), commodity (such as Oil) and index (such as the Dow Jones). Basically, it is the item which is being traded. This fixed price is the price at which an asset is bought at – in options trading it is known as the strike price.
The time frame is known as the expiry time and the investor can choose one of four times: the end of the hour, day, week or month. On the anyoption™ platform, there is also the opportunity to trade over the weekend when most of the markets are closed. By using the One Touch option, traders receive a payout if their chosen underlying asset touches a predetermined barrier. See One Touch for more information.
In option trading, there are two types of option strategies: a Call option and a Put option.
A call option, is purchased when the buyer believes that the chosen asset will expire above the strike price at the specified expiry time. So, the option is purchased at the asset’s original lower price in the hope that the option will expire in-the-money.
A put option, is purchased when the buyer believes that the chosen asset will expire below the strike price at the specified expiry time. So, the option is purchased at the asset’s original higher price. If this happens, then the option will expire in-the-money.
Since option trading only involves purchasing a contract and not actually buying the asset itself, the magnitude asset price change is therefore irrelevant. It must only move by a small margin for the investment to be profitable. Hence, option trading is extremely popular amongst many traders. The potential risk is known, since the maximum amount that can be lost is the initial outlay of the online investment. Also, the knowledge that a buyer trading options must have of the market, in comparison to a conventional market trader, is much less, so the opportunity for trading is opened up to a wider audience. So the risks of option trading make it an attractive form of investment for many people.
Additionally, currency trading was only accessible to wealthier customers who could afford to trade with large quantities of currencies. However, due to the introduction of online trading platforms, such as anyoption™, profiting from currency option trading, even for small investors, is possible and achievable. Online investments also enables people to invest whilst in the comfort of their own home. They can trade from wherever they are geographically, without the need for a broker.
Online Options Trading
Posted by admin in Options Trading on August 10th, 2009
Online trading options is when an investor literally - trades options online. An option is a contract, where a buyer has the right, but not the obligation, to buy or sell an underlying asset at a set price (the strike price) within a specified time frame. When a buyer enters into this contract then he has begun trading in the underlying asset. He may choose to trade online – reaping many benefits will be explained below.
In option trading, a buyer can select between different underlying assets for his online investment. He may trade in currencies (e.g. USD/JPY) known as forex option trading, commodities (e.g. Gold) known as commodity option trading, stocks (e.g. Google shares) known as stock option trading and indices (e.g. FTSE 100) known as index option trading. The anyoption™ platform offers over 50 possible assets to invest in. The buyer must then select his preferred expiry time: the end of the hour, day, week or month.
Purchasing an online investment works like this: a buyer decides whether he thinks that by his selected expiry time, the chosen asset will be above or below the strike price. If he thinks that the asset will settle above the strike price then he purchases a call option. If he thinks that the asset will settle below the strike price then he purchases a put option. (see article ‘option trading’ for more information). This can all be carried at out at the click of a button by trading online.
A trade is successful depending on whether the contract expires above or below its strike price. Using the anyoption™ platform, a trader receives a 65%-71% payout when the option expires in-the-money, and a 15% payback if the option expires out-of-the-money.
For example, Investor A places a ?100 online investment on the price of Gold, currently sitting at 955.10 with a return rate of 70%. He selects a call option with an end of the day expiry. If at the end of the day, the price of Gold is 955.11 or above, then Investor A receives a payout of ?170. If at the end of the day, the price of Gold is 955.09 or below, then he receives a ?15 payback. This is a typical online binary option trade and its formula is simple to follow for other assets.
Online option trading is a growing preferred method of investment for many investors. There are several reasons supporting this:
- Option trading is a type of binary option – this means that an option is being trading, rather than the asset itself. So, the payout is determined once the contract has been created. There are only two possible outcomes in binary option trading: or the option expires in-the-money and the owner receives a fixed amount of cash; or the option expires out-of-the-money and the owner receives nothing. Or in the case of trading on the anyoption™ platform, they receive a 15% payback of their initial investment if the option expires out-of-the-money.
- Options are easier to trade since the buyer only needs an idea of which direction the asset will move, up or down, rather than predicting the magnitude of the change. This makes it easier for the buyer to receive a payout.
- Option trading is extremely flexible, due to the wide choice of underlying assets and expiry times available.
- The online trading risks are much lower, since the buyer controls how much he invests and the most he could lose is 85% of his investment amount. Once the investment has been made, regardless of the magnitude of the price change, the investor will not be called upon for more money.
- Investments are easily carried out online using the anyoption™ platform, so a trader need not use a broker and can trade from most geographical locations