If you are looking to start trading on the stockmarket, and you want to know everything there is know about it, then you need to learn more about binary options. Binary options are a very different option so knowing the difference will give you a huge advantage down the road. It can be complicated but there is an easy way to understand this aspect of the stockmarket, and once you know the full details;you will have more success overall in your portfolio. The following are some of the main points that you need to know about binary options:
The Cash or Nothing Option
This type of binary option means that if you spend a hundred dollars on a future return of a thousand dollars, and the stock closes above one hundred dollars; you receive a thousand. However, if the stock falls below a hundred dollars, then you lose everything. This is good because your investment can be lower with a higher return, and if you lose, you are not losing much.
The Asset or Nothing Option
This is practically the same as the cash or nothing option with the only difference being you can receive your initial investment back.
Binary options are a very different option so understanding the difference will give you a huge advantage down the road.
CC image courtesy of StockMonkeys.com
So if the investment is a hundred dollars and the return is expected at thousand, and it falls below the one hundred dollars at the end of the future, then the investment is returned so you are not left with anything. This type of binary option has less of a risk but the initial investment is more, and the return is less.
As you can see, this is not like option's trading in that an option trading sets the price of the stock for a certain period of time in the future. Binary options also have a certain amount of time, the investment is immediate and the pay-out is in the future. Both are considered a form of future's trading, but the time stamp on both is much different.
If you are thinking about getting into the stockmarket, you need to know the meaning of all the different trading terms if you want to be successful. Binary options are future's trading options that allow for cash, asset or nothing back. Whereas option's trading allows for a set price on a stock that must be purchased within that time frame in order to buy at the set sale price. Make sure that you are a winner when entering into the stock market and do your research well. So many people think that they will be able to be successful by doing no or little research. Don’t lose out by being blind to the world of stocks. Start to learn today!
This post has been written by Marco M, a finance writer for top sites like Exchange Currency, Options Trading, and Financial Trading. He writes about saving trading and other financial issues.