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Reasons to Trade Binary Options

Options trading confuses many people, especially people who are new to investing and trading. While there are complicated formulas in options trading, almost all of that stuff happens behind the scenes and the person trading doesn’t really need to know any of it. In theory, options are very simple: they are basically a bet that, from a certain time in the future, the stock price will be above or below a certain price (called the strike price).

So people try to profit from buying and selling options in the same way they try to profit from buying and selling stocks, with different strategies based on whether they think the price will rise or fall in the future. go down.

Some complex formulas come into play when pricing options. The price of an option will change constantly as the price of the underlying stock changes, and there is also something called a “time premium” built into the value of the option. What this basically means is that the longer an option takes until expiration, the more premium is added to its price. This makes sense when you think about it, because an option with a long future date has more time for the value of the underlying stock to exceed the strike price of the option. In other words, an option that expires in 5 minutes only has 5 minutes left for the price to cross its strike price (if it hasn’t already), but an option that expires in 5 days has a much higher chance.

Binary options are a special type of option that pays “all or nothing” based on the price of the underlying stock at expiration.

There are several reasons a trader might want to consider binary options, and they include:

easy earning – If the stock price is higher than the strike price at the time of expiration, you pay. If not, you don’t. There are no crazy formulas to follow.

Limited risk – every possible outcome is known in advance, so there are no possible surprises where you may end up owing more than you initially invested (something that happens from time to time with option trading, and one of the reasons that people tend to think “options can be dangerous.”

Availability – as binary options continue to become more popular, there are more and more brokers offering them to traders.

Remember to always read your broker’s terms and conditions before trading.

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