Many investor are unaware of binary options and their massive potential. Binary options are a brand new trading tool that is easy, cheap, powerful and fun. If you have been trading penny stocks, then read on to know why binary options can be a much better option. In simple terms binary options are yes or no bets on the future market direction.
You can trade stocks, currencies, commodities and much more with binary options. Suppose, you think that AUD/USD rate will rise above 1.000 or EUR/USD will fall below 1.3570, you can profit from your opinion by betting with a forex binary options contract. If your prediction comes out right, you make a profit and if it doesn’t, you make nothing. It is as simple as that with binary options. This payoff is $100 per binary options contract. And incase, your bet went wrong, you make $0 payoff.
Let’s take an example. You think that EUR/USD rate will be 1.2430 in the next five days. Right now, the EUR/USD rate is 1.2380. You are a very good chart analyst and you are sure that within the next five days, this rate will reach 1.2430. What you do, you decide to buy a few forex binary options and profit from this increase in the exchange rate of EUR/USD.
So, you buy one EUR/USD forex binary options contract for $7 that will expire in five days and has a strike price of 1.2430. If after five days, EUR/USD exchange rate is above 1.2430, you make $100 and if it is below 1.2430, you make $0.
Suppose, instead you buy 30 EUR/USD forex binary options contracts for $7 each that will expire in five days and has a strike price of 1.2430. Your total investment is $210 ($7*30). If after five days, EUR/USD exchange rate is above 1.2430, you make $100 per contract or a total of $3,000 ($100*30). The other possibility is that the EUR/USD exchange rate ends up below 1.2430 not above. You lose your investment of $210. Whatever, binary options are a great new way to profit from the volatility in the market. You can trade half hourly, hourly, daily and weekly binary options.
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