Posted by Shirley Clark
on Aug 16, 2016 in Default
| Comments Off on Binary Options for Dummies (Yes, you). Part 2.
It is catchy, right? Binary Options for Dummies. Last time you read you got a basic understanding of what is a binary option.
- A Binary Option is a Call on the Market
- You wager if the price of a stock will go up or go down.
- If you get it right, you can ‘call’ the option.
- Calling the option gives you the choice to buy at your assumed price.
It is basic, I know. And not entirely accurate, but you need to have a simple understanding to continue. Again, this is not a blog about ‘becoming a Binary Option expert’ but rather, ‘hey, I (Kinda) get this Binary Stuff’.
Fancy Financial Jargon
A strike price is the price at which an investment can be bought or sold by the option holder by a specific date.
How it works: If you guess appropriately on the market’s course and the price at the expiration date is higher than the hit price, you would be paid a fixed come back no matter how much the stock went up. If you gamble improperly on the market’s course you would lose your complete investment.
The contract price of a binary options agreement is roughly equal to the market’s perception of the probability of the event happening.
How it works: The cost of a binary option is shown as a bid/offer price that shows the offer (sell) price first and provide (buy) price second, for instance, 4/95, which symbolizes an attempt price of $4 and an offer price of $95.
“In-the-money” and “Out-of-the-money.”
To be in the money is to have the option price is above the selling price. Out of the money is when the strike price is above the market value.
How it works: To get a call option, in-the money happens when the option’s strike price is below the market price of the stock or other asset. If is actually a put option, in-the-money happens when the hit price is above the selling price of the stock or other property. Out-of-the-money could be the opposite when the strike price is above the market price for calls, and below the selling price for a put option.
Summing It Up
Okay, now you know what the major terms mean in Binary Option Trading. Can you trade yet? No. But if you bought a ‘for dummies’ book, this is the most you would remember from it. If you want to learn more, keep reading this blog to get more financial advice or for goodness sake, find a financial planner.