Posted by Shirley Clark
on Aug 15, 2016 in Default
| Comments Off on Binary Options for Dummies (Yes, you). Part 1.
Binary, Vanilla, Options, Market, Stock, Trend, etc. It can all get confusing. Just like talking to an American about Football (I mean soccer, for those who do not know), things can be confusing and a lot can get lost in translation. Due to this, even the most intelligent person can get lost in finance. To make your money work for you, you must understand your options.
Options are on the Table
A binary option, sometimes known as digital option, is a kind of option in which the trader requires a certainly or no position on the price of a stock or other advantage, and the ensuing payoff is all or nothing. Because of this characteristic, binary option can be much easier to understand and trade than traditional options.
Binary options can be exercised only on the expiration date. If at expiration the option forms above a certain price, the customer or seller of the possibility receives a pre-specified sum of money. Similarly, if the option settles below a certain price, the buyer or seller receives little or nothing. This requires a known upside (gain) or disadvantage (loss) risk assessment. Contrary to traditional options, a binary option provides a full payout no matter how far the asset price settles above or below the “strike” (or target) price.
Let Me Say it Slower…
An “option” in the stock market determines a contract that offers you the right, but not the obligation, to purchase or sell a security at a specific price on or before a certain date in the future. In the event you believe the market is rising, you could purchase a “call, inches which gives you the right to get the security at a specific price through a future time. This means you think the stock will increase in price. Should you imagine the market is dropping, you could purchase a “put, ” giving you the right to sell the safety at a specific price until a future date. This means you are betting that the retail price will be lower in the near future than what it is trading for now