What are binary options exactly? This is a question that has been ticking in minds of new traders who wanted to expand their trading scope. It is also a form of investment in the financial market, just like other methods, where the trader places a trade that has a fixed reward as well as a fixed risk.
These assets are known as a binary option as they involve only two options. Similarly, these trades entail getting one or the other payout option, once the contract has expired.
The working of binary options is not complicated, you just have to know about basics of how to invest in share market. What you need to do is indicate whether a fixed asset, which includes commodities, stocks, and currencies, will go up or down in the value within a fixed period, which is the expiry period for your contract.
Practically, you are betting whether the market value of the chosen asset will go up or down within a certain period. While choosing to trade on your preferred binary options trading platform, you will be shown the expected payout on the opening position.
Most of the brokers charge 70 to 85 percent of the invested money. Similarly, if your prediction is wrong, in the open position, at the time when your contract expires, you will have lost the bet and consequentially, the money you invested in the trade. MCX trading tips are less costlier than binary option tips
Stock Binary Option Tips
Let us understand more clearly with an example.
Suppose, you bet Rs 100 on an asset whose current price is Rs 161 and the expected payout is indicated as 80 percent. You need to stake the Rs 100 on this position and set your preferred expiry period, to say one hour. If at the end of the one hour the price of the asset goes up and you had predicted that it would go up, you will have won the position. In this case, you will get the amount you staked on the position, Rs 100, and an additional 80 percent of the staked amount.
In total, you will get Rs 180 from this trade. However, traders need to be careful that the start point by which the price of the commodity move will not determine the payout amount. If you had predicted that the price of the asset will go up and drops instead of going up, by the time the contract expires, you will lose the trade and consequentially, the money you bet on the position.
Since 2008, investing and making money online with binary options has become increasingly attractive to investors and individuals who invest in shares, equities, currencies, and commodities.
In binary options trading, you are betting that the price of a specific asset will either increase or decrease during a set period. You have the benefit of knowing your risk and return rate up front before the trade ever takes place. Binary trading is an excellent way to get into the market without a large outlay of capital or capital reserve required.