Binary Option - Clearly Defined At anyoption™
Simply put, a binary option - also known as digital option or fixed return option - like any type of option, is a contract where the trader has the right, but not the obligation, to sell or buy an underlying asset at a specified price on or before the expiry of a specified time period.
For this reason, options are often called derivatives because it derives its value from something else. Since the commencement of the Global Financial Crisis on 2008 the term “derivative” has fallen out of favor because of its negative association with fraudulent and excessive options trading against underlying assets that proved to be worthless.
However options trading, and particularly binary options trading, has been and always will be a popular choice for traders willing to exploit true market value fluctuations in many tradable commercial commodities and instruments that have and always will have underlying base, but fluctuating, values. These include, of course, foreign exchange pairs (e.g., the value of the US Dollar against the Euro - or USD/EUR) and also commodities such as gold and silver. Binary options are a form of option that has recently gained surprisingly huge popularity because of its simplicity.
In mentioning foreign exchange pairs, binary options trading should not be confused with normal forex trading.
Trading binary options does not include commission fees and the trader may purchase the option at the spot price and not the spread.
Binary options trading does not use leverage which includes more risk for the investor. With traditional forex trading leverage can work against the investor just as easily as it can for him/her. This means that a small change in value of the USD/EUR currency cross could wipe out the investor’s total available funds, built up from prior profitable trading.
With binary options trading there is minimum risk as the trader cannot lose more than the original investment in the chosen binary option trade. The investor needs to invest a small amount to make high profits, whereas with traditional forex trading a much larger investment is required. With binary options the expiry time parameter can be chosen on the outcome, be it either end-of-hour, end-of-day, end-of -week or end-of-month. Although not all binary option platforms offer these expiry times, the company mentioned below does.
Additionally, binary options allow the trader more opportunities to trade on different assets, not just currencies.
Additionally, trading binary options usually does not require software downloads in order to operate the platform, with the trader having access anywhere they have internet; from their home, vacation, and mobile phone.
There are further clear advantages of binary options -
(1) The returns are known in advance,
(2) There are no liquidity or execution issues, and
(3) There are a wide range of expiry points.
This means that traders can make instant profits and be more flexible when investing. One word of warning however - the trader in a binary option must hold onto his option until the expiry date. He cannot sell it once it is purchased. Even here though there is flexibility in being able to either shorten or lengthen the original expiry date. Such flexibility is provided in the company mentioned below through its Option+ tool.
Trading binary options complements forex trading since investors not only trade on other assets, they also have the opportunity to trade simply on currency pair up and down movements, without worrying about spread, leverage, pips and commission.
Here is an example showing how to turn $300 into $1,500 by purchasing 3 binary options on currency pairs with end of day expiry times:
Day 1 - Tuesday: $300 Put option bought in EUR/USD at a strike price of 1.38460 with a return rate of 71%. Expiry level is 1.37780 so the trader receives a payout of $513.
Day 2 - Wednesday: $513 Put option bought in Oil at a strike price of 86.640 with a return rate of 71%. Expiry level is 85.780 so the trader receives a payout of $877.
Day 3 - Thursday: $877 Call option bought in the Dow Jones at a strike price of 11,263.120 with a return rate of 71%. Expiry level is 11,283.100, so the trader receives a payout of $1,500.
So, in this example, the total payout received would have been $1,500, with a profit of $1,200.
According to Virginia Reynolds, a partner of M and V Reynolds & Associates:
“A world leading binary option trading platform, anyoption™, offers 80 underlying assets with a wide range of expiry times - hourly, daily, weekly and monthly.”
Examples of underlying assets offered by anyoption™ include stocks (e.g., Microsoft) or a recognized index of stocks - e.g., Nasdaq. These can cover the American, Asian, Middle Eastern and European markets in 8 languages with French being the most recent language added. Trading is 24/7 and no software downloads are required.
According to anyoption™, “Binary options are defined as such as it is an option whose outcome is known from the start and whose result is all or nothing (in theory - though there are some exceptions demonstrated on the anyoption™ site). The anyoption™ platform was created to allow anyone to make quick profits online, based on their estimation on an asset price direction (up or down) within a specific time frame”.
Virginia Reynolds continues: "Each binary option trade made through anyoption™ can be personalized with the following variables:
(1) The selection of the underlying asset itself.
(2) The expiry time.
(3) The selection of the direction in which the asset is predicted to move, up, being called a “call” and down, being called a “put”.
(4) The price at which the option is bought, known as the “strike” price"
Once the option is purchased the investor must wait until the expiry time to discover whether his/her prediction proved correct. If the price of the underlying asset rises under a “call” or falls under a “put” then the investor will be “in the money”. If the opposite occurs then the investor will be “out of the money”. It is important to remember here that the investor has no further financial obligation. There are no margin calls as these don’t apply. The option purchase price is lost, that’s all, although the anyoption™ platform will pay back 15% of the option purchase price to the investor if this occurs. For “in the money” trades anyoption™ will pay the investor 165 -171% of the option purchase price"
A binary option commodity trade would look something like this for example:
$100 binary call option is traded on the price of oil, currently at 97.65, which has increased by the end of the next hour. At the end of the hour, it has increased to 97.67 and so the investor receives a 70% payout of $170.
Naturally the question could be asked: How does the trader get a 70% increase on a movement of 97.65 to 97.67?
The answer is that the payout rate of 70% has nothing to do with the extent of the price movement. The 70% is paid IF the price is higher than the strike price, or lower, depending on the position (i.e., call or put) opened by the trader, irrespective of the extent of the price movement.
Similarly for this binary call option trade, if the end price is less than the strike price then the $100 is lost, except that with anyoption™ 15% of the initial investment is returned.
The 70% return is set at the beginning at the period and is made known to the trader.
It can be easily deduced that payouts are funded from the total pool of funds traded in these options.
So the word “binary” means “yes” or “no”. If, on a call option, the price is higher than the strike price at the end of the predetermined period then the trader is in the money and the agreed-upon percentage is paid. If it isn’t then the trader is out of the money and 15% of the original investment of $100 is returned. If, on a put option, the price is lower than the strike price, irrespective of the extent of the price movement, then the trader is in the money and the agreed upon percentage payout is made. If the price is higher then the trader is out of the money and 15% of the initial investment of $100 is returned.
So it is possible for the trader to gain 170% of his investment in one hour, depending on the variables mentioned above. Inevitably, in any given mix of binary trades, there will be losses, but if the trader can find the right balance he will be able to maintain profitability overall.
anyoption™ offers platforms to all international markets, in 8 languages (English, French, Spanish, German, Italian, Russian, Turkish and Arabic) and operates 24/7 with multilingual customer support - phone, email and live chat. Additionally, anyoption™ provides a mobile app for the iPhone/Android.
Unique features of the anyoption™ trading platform include:
(1) Option + can be offered, but not in all cases, as “Take Profit” and “Roll Forward”:
Take profit :
This is a tool for traders who wish to lock in their binary option’s profit before an asset’s expiry time. In exchange for a premium, a trader who is offered Take Profit can get the promised return on his option, before the original expiry time of his purchased binary option, irrelevant of the asset’s actually expiry time. Take Profit will be offered on certain options corresponding to the parameters defined on the trading system of anyoption™ and will be displayed on the trading page 15 minutes before the expiry time for 5 minutes.
This allows traders to postpone the expiry time of their binary option, to the nearest available expiry time. In exchange for a premium, a trader who is offered Roll Forward, can postpone the expiry time of his option to the nearest available expiry time from the original expiry time. Roll Forward will be offered on certain binary options corresponding to the parameters defined on the trading system of anyoption™ and will be displayed on the trading page 15 minutes before the expiry time for 5 minutes.
(2) Profit Line - Traders can view the real time profit of their investments on the graph, following the asset’s live market fluctuations.
(3) Free SMS service anyoption™ offers to customers who purchase a binary option of 100 USD/EUR/GBP or more. They are given the choice to receive the option’s outcome by SMS.
(4) Additionally, for assets which a buyer has not yet invested in, they can view the real time trend analysis of the asset, displayed in each asset’s trading box. This will help a trader with their decision. The anyoption™ website features a demo on how to purchase an option.
(5) One Touch- When the markets are closed, traders can purchase options over the weekend. Traders receive a payout once the price of an underlying asset reaches a predetermined barrier. The payout can reach as high as a 350% return for selected assets.
To find out more about anyoption™ and what it has to offer open an account at http://atanyoption.com and explore the site fully.
- Contact Information
- Michael Reynolds
- M and V Reynolds & Associates
- Contact via E-mail
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