Posts Tagged option trading
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.
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