binary options, frequently known as "binary options" or "fixed return options" are much like traditional options in lots of ways but in addition differ in some very significant ways. They're really fairly simple trading instruments requiring no exceptional familiarity with or experience with trading or financial markets. Of course, superior familiarity with markets and trading does often cause superior results nonetheless it is obviously not really a prerequisite to being truly a profitable digital options trader. In this brief article we shall touch on both some advantages and disadvantages to trading digital, or binary options.
Digital options, much like traditional options, are available on a large quantity of underlying assets. With stocks, indices, commodities and currencies being the most used assets available where to base your binary options trades. However, unlike traditional options these "exotic" options shell out that fixed, known return. And it isn't at all dependent on how far "in-the-money" the choice is. If the underlying asset you traded an electronic call option on is higher then a strike price by so much as you pip/tick then you are paid out the exact same high returns like it finished in the cash by 100 points. Magnitude is irrelevant with digital options. Certainly this is one of the appealing options that come with trading in digital options for investors.
Digital Options Trading Highlights
- Market Neutral Instruments
- Quick And Easy To Trade
- Strictly Limited Risk
- Small Initial Investment Required
- Have No Commissions, Fees, Or Other Hidden Costs
- High, Fixed Potential Returns Known Beforehand
- Requires Only A Small Move In The Underlying
- Can Be Traded At Any Time Of Day Or Night
- Trade On Stocks, Indices, Currencies, Commodities And More
Some Digital Options Trading Disadvantages
- Potential Returns On Winning Trades Will Always Be Less Then Potential Losses On Losing Trades (You'll need roughly a 55% win rate for profitability)
- Many Digital/Binary Options Brokers Offer Trades Which Amount To Little More Than A Roulette Spin - 60 Second Options To Name One. (We're fans of binaries but we do recommend our less experienced readers stay free from these types of trades.)
- No Claim To An Underlying Asset (a possible disadvantage for many however for most not even an issue.)
- Some Regulatory Conflicts For US Based Traders
digital options trading can be a great choice for some investors or speculators but as with anything in life it too has both its drawbacks and strengths and isn't right for everyone.