Previously, binary options could be traded only over the counter with the help of a middleman but in the year 2009 CBOE (Chicago Board of Option Exchange) made this tool of trading for the common people and binaries now can be traded online as well. In binary options trading, it is the buyer who selects the purchase price, the expiration time of the option and also he has full right on his option while selling it. Binary options are not traded like traditional trading. Binary options do not require an asset to be bought in its physical form but the buyer is required only to predict the direction of the security price in future. The profit in binary options depends on investor’s ability to predict the right direction and also on how to gain maximum profit within a short time. Since In increasing number of new traders is also entering the market to try their luck seeing binary options’ easy method of trading, here are some tips that might help the novice in trading binary options.
Although, binary options are easy to trade, you must have the basic knowledge of the trading and you should have clear perception about the direction of the strike price. Since binary options provide only two results, it is important that your option should end in the money to list profit. If you opt for a call option then the option should close above the strike price and if you have opted for a put option, the option should close below the strike price.
If a trader selects a call option thinking the option will cross the strike price in future and his prediction become right before the expiration time, he gets his full payout but he loses his invested money and gets nothing if the estimation does not meet the certain conditions. Investors in the market buy a call option only when they are sure that the price will rise in future. A fall in the price means the option is in loss.
Traders also prefer call option because they get leverage. In binary call options, if the price goes above the strike price even by a pip, the trader is likely to get 65% to 855 more profit along with the invested money. A trader is free to hold as many options as he wants on one side of the market.
Since binary options are short term option, the price of the option may go through fluctuations many a times in a day. The traders must have a clear viewpoint about the price movement before buying a call option. Most of the traders, who know how the financial markets work, evaluate various securities according to their selling and buying conditions. When there are more buyers than the sellers, the price of the option is likely to go high. When the number of sellers surpasses the buyers, decline in the price occurs. So it becomes important for those who prefer to invest in call options only, to study the reports and charts closely which are displayed by various platforms on their sites.