Financials: understanding binary options
Learn the basics for buying binary options at online casinos.
Many online casinos now facilitate certain forms of stock market speculation, most commonly ‘binary options’. As this binary options infographic explains, they have been tradable since 2008. While more straightforward than other financial options, playing the market with binary options is still a complex process and it takes a significant amount of knowledge and skill to make this kind of trading profitable. This step-by-step guide will introduce you to the fundamentals of binary options trading.
What are binary options?
In finance, an ‘option’ is an ‘over-the-counter’ contract in which the buyer is given the right to buy or sell an instrument (tradable resource) within a set time period. In effect, you buy stock in an intrinsically valuable commodity and can attempt to sell it on at a profit.
A binary option provides only two possible outcomes at the time your option expires (hence ‘binary’): either you receive a fixed pay-off or you lose your option with zero return. You can buy a binary option in ‘either direction,’ meaning you can speculate that it will increase or decrease in value within the expiration period.
When purchasing binary options, you can buy either:
‘Call/up’ options: you will receive a payoff if your option has increased in value when it expires.
‘Put/down’ options: you will receive a payoff if your option has decreased in value when it expires.
For example, assume you purchased a binary call option on Foreign Exchange (Forex) at £500 with a £10,000 binary pay-off. If at the maturity date (time of expiration) your option was trading at above £500, you would receive £10,000. If it was trading at less than £500, you would receive nothing. In order to trade binary options, one needs to visit a binary options broker. As Investoo explains, choosing a binary option broker involves scrutinising regulation, withdrawal speeds and payout features (typically, the best brokers offer 90%+ payouts).
Buying binary options
Here are some examples of the markets for which you can purchase binary options:
- Gold and silver: value determined by rates from international banks.
- Oil: the price of oil barrels as quoted by an elected market.
- Foreign exchange pairs (Forex): trading currencies against one another based on fluctuations in value. Value determined by international banks.
- Market indices: the status of global stock markets, as quoted by their respective nations.
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