Tuesday, February 17, 2015

Options Trading Video Tutorial - Intro to Binary Options Trading

Options Trading Video Tutorial
Any option trading tutorial would be incomplete if it didn't mention a simplistic form of options called binary options trading. Not too many investors know about this form of investment but it is a very hot market right now for people not willing to be stuck with long holding period investments such as stocks, bonds, mutual funds, traditional option contracts and futures. You may look on the web for another option trading tutorial if you want to know about the more common form of contracts trading. This tutorial will focus only on binary options trading.

Binary contracts are, like the name implies, bi-polar. Either you choose the "up" side of the switch, or the "down" side. You might think of it similar to any two-sided choice - yes or no, true or false, heads or tails, on or off. In this case the binary switch refers to up or down movements in a stock, currency, or index. Options Trading Video Tutorial
How it works is that you, or I, or any investor with a binary options trading account picks one of the available securities to trade (not all securities are traded... only the highest volume securities are traded this way) and selects how much to invest. Once the amount to invest is selected the investor must choose which direction the security will go, up (choosing "call") or down (choosing "put"). The trading software computes the payouts (also fixed based on the contract) and if satisfied with the contact, the investor submits the order.
The really fascinating part about this sort of transaction is that it does not matter how much the stock moves... the only thing that matters is the direction. The payout at the end of the contract is the same whether the security jumps a nickel or twenty dollars. If the binary options trading contract is for a 75% payout on an up movement of a security on a $ 100 investment and the stock is up even just one cent at the expiration of the option, the investor receives $ 175 ($ 100 invested plus $ 75 profit). Options expire typically hourly so a successful trader can execute many contracts every day.
So in summing up this binary trading tutorial:
Contracts have fixed expiration (hourly) - and can't be sold prior (although it is simple enough to simply make another contract with the same expiration)
Trades require the investor to choose only how much to invest, which security, and which direction Options Trading Video Tutorial

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