Should you Put or Call when it comes to investing in binary options? Binary option signals have grown widely popular since the late nineties due to its offering of fixed risks. Investing without ‘risking it all’ is an enticing offer, one that binary options makes possible. Surely you’ve heard of a lot of people opting for binary options, but what are they? How do they work? And most importantly how can you use them to make smart investments? Worry not! We’ve got it all covered right here.
Overview of Binary Options
Simply put, it is a contract between two parties. One party agrees to sell or purchase his contract at a determined price, without any obligations to do so. What this means is that the next party can easily walk away from the contract without risking any action.
Binary options are a type of derivatives trading. The prices are not actual tradable securities but are rather derived from the underlying stock. Binary options are also commonly referred to as Fixed Risk Options as an investor does not lose more than what he invests in the option.
Binary options enables traders to simply select which direction the underlying securities are more likely to go, select the expiry date of the option and invest in it. If the security price moves in the opted direction, the trader gets paid a fixed return, commonly ranging from 65% to 89%, and if the price moves in the other direction then the trader loses the invested amount.
Should You Call or Put?
There are two choices for the trader in Binary Options, either to Call or Put. A trader would opt for Call or Up option when he believes that the price of the option is likely to go up from the time he purchased the option. Similarly, a trader would buy a Put or Down option when he believes that the price would drop in value from the time he made the purchase. The trader either makes a profit or loses money based on the option expiry time. There are variable expiry times of options, ranging anything from as little as 60 seconds to even weeks and months.
In-the-Money (ITM) or Out-of-the-Money (OTM)?
ITM or OTM refer to the way an option expires. For instance, if the price of the security closes in the same direction as the trader selected, it will be considered an ITM expiry. If the option expires with the price of the security closing in the opposite direction, it will be considered OTM expiry. For example, if the security prices close higher than the purchased price of the option, and the trader had selected the Call option, then the option will expire in-the-money.
What Are Binary Options Signals?
A signal is in the form of an SMS or email sent to a trader, advising him how to enter a new trade. These signals are usually sent on a daily basis and expire as soon as the market for the specific asset is closed or expired after the announcement of the final price. The timings, frequency and most importantly, accuracy of the signals depend on the providers and traders preferences.
Traders need to opt for the right binary options signals in order to invest wisely and at the lowest risk possible.
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