Online trading has seen a major surge in popularity in recent times due to its simpler nature and the recent lock downs all across the globe has forced people to look for unconventional money-earning methods. There are many different options out there for online trading and one of the more simple and interesting ones is Binary Options.
What is Binary Option?
Binary Option is a financial option that has capped profit and loss values and provides the trader with a simple yes or no proposition. Depending upon the answer of this proposition and the price of the option to either side of a fixed price determines the profit or loss of the trader. The fixed price which determines the outcome of the trade is called the strike price.
The binary option provides you with a simple question i.e. the price of a certain commodity will be higher than a fixed strike price at a certain expiration time. If you say yes to this proposition and it turns out to be true, the return is given to you determining a certain profit. If the answer you gave is not true, you lose the whole investment. It simple as a yes or no answer but it involves knowledge of the market trends, strategies employed for trading, your experience in the field and as well as the choice of an option with a certain expiration date.
Binary Options VS Vanilla Options
The regular Vanilla Options or simple called “options”, provides the trader with the potential ownership of the underlying assets which the trader can sell before their expiration date. These usually have a fixed amount of risk involved.
Binary Options on the other hand, do not give the possibility of taking a position in the underlying asset. There is a fixed amount of payout and the potential risk is capped at the amount payed to buy the option. The movement in the underlying assets does not affect the returned profit or the amount of loss that the trader will have to bear.
Convenient and Simple
The major advantage of this misunderstood financial instrument is its convenience and simplicity. The straightforward nature of this financial option makes it appealing all on its own. Wit the proper knowledge of the underlying assets and the trends of the concerning market, binary options trading is like answering a question whose answer is either yes or no. this alone makes it a popular trading option.
Another advantage is the widespread popularity of social trading, where traders help other traders as a community, by sharing their experience and data. There has been a rapid increase in chat-based trading groups which share experience and data in real time to make profits and help others make profits or their own.
One of the most appealing selling point of social trading is the fact that it establishes “symbiotic relationship” between the trading community. It provides a beginner-friendly way towards online trading as well, where novices and new comers seek the help of trading veterans in an attempt to have a good start in their trading career and have a strong start.
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