What Are Binary Options and Should You Love Them?

accountant-1238598_640If you love investing and are looking for new ways to diversify your portfolio then binary options may be the right investment choice for you.

What are binary options?

According to Investopedia “Binary options are based on a simple ‘yes’ or ‘no’ proposition: Will an underlying asset be above a certain price at a certain time? Traders place trades based on whether they believe the answer is yes or no, making it one of the simplest financial assets to trade. This simplicity has resulted in broad appeal amongst traders and newcomers to the financial markets.”

In a nutshell you are placing a bet on whether a commodity, stock index, Forex, event or Bitcoin market will gain or lose value.  Essentially you have a 50/50 chance at making or losing money.  That seems pretty easy right?  Well it’s a little bit more complicated than just a yes or no answer – behind the scenes.

Who should invest in binary options?

Binary options allow investors to bet on trade price fluctuations in both domestic and global markets. There are several factors that go into purchasing a binary option such as the current condition of the market, trends and a little bit of pure luck.

Even the most sophisticated investor can’t predict the market, but that’s always a risk you take when investing in anything from options to mutual funds.  You invest in something that fits with your time horizon, risk level and objectives and hope for the best.

If you’re going to be on the ponies (where you have a 1 in 9 shot of winning) you might as well place a bet on your favorite commodity.  It’s very important for investors to fully understand how binary options work before investing.  This includes market options and time frames as well as the advantages and disadvantages and risk involved.

How do they work?

Like many financial options there is a buy and sell price for binary options.  If you think the commodity will trade above a certain price then you purchase the option to buy, if not then you purchase the option to sell.

Here’s an example: Do you think the price of oil be above $46 a gallon at 4:00 p.m. EST today?

If you believe it will be then you would buy the binary option. If you don’t think so, i.e. the price of oil will be below $46 a gallon at 4:00 p.m. today then you sell this binary option.

As you can see on the surface trading binary options may seem like a simple yes or no answer, but underneath there is research and understanding of the market that needs to be done.

If you’re a sophisticated investor you may want to look into adding binary options into your investment portfolio.  You can purchase binary options with companies such as BancDeBinary who aims to simplify trading for the 21st century investor with over 200 different stocks, commodities, currencies and indices on their platform.   Just remember, get informed before you invest.

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