Until recently, binary option trading wasn’t open to individual investors. The only way individuals could access binary options was to hire a middle man, or a binary option broker. Typically, to hire a binary option broker costs a minimum of $500 up front, making it extremely difficult for many individual investors to enter the market. However, in 2008, the general trading public finally gained access to this new and more simpler trading instrument. In the summer of 2008, the Options Clearing Corporation began listing binary options . Shortly thereafter, both the American Stock Exchange (AMEX) and the Chicago Board Options Exchange (CBOE) also began listing binary options. As a result, individual investors can now directly trade binary options online through brokers such as Optionbit, StartOptions, EzTrader and AnyOption. Since its inception, binary trading has enjoyed exponential growth attracting seasoned traders as well as new investors. All binary options are traded over the counter and certain types of options such as the currency-based binary options, are available 24 hours a day, 6 days a week.
Binary Option Trading Guide
Binary options are high return, short term investments traded by both professional traders and amateurs. While the basics of binary options can be learned within a few minutes, there are numerous advanced strategies that traders and investors can learn in order to increase their chances of consistently making high return payouts. The first place to start is to obtain the trading guides offered by your binary option broker. Since each broker offers a different twist or variation to the basic binary option, it is best to read up on the "house rules" to ensure that you can leverage the opportunities of each and every trade. Most leading binary option brokers will offer trading tutorials and strategies for all of their clients. Optionbit, for example, provides video tutorials, in addition to binary option trading lessons and ebooks for free. Its comprehensive option trading ebook covers the different types of binary option trading available on the market and even provides technical analysis methods and strategies to help you get a high return on your investment.
Benefits of Binary Option Trading
When compared to more traditional options trading or other investment vehicles, binary option trading offers some unique benefits. Firstly, it is simple to understand and use. Secondly, the potential to gain upwards of 70 to 85% profits on a trade within a short span of time (time to option expiration can be as short as one hour). Thirdly, the risk-to-reward tradeoffs are simple to calculate and the potential return on investment (i.e. your potential profit) is already known. Hence, binary options are sometimes called Fixed Return Options, FROs. Prior to execution of any trade, the FRO's profit or loss potential has been predefined. Thus, a trader knows exactly how much profit he can expect from a winning trade, and likewise, how much he can expect to lose from an out-of-the-money trade. Furthermore, there are no commissions associated with trading binary options.
Market Volatility
Unlike traditional markets, binary option trading is not as vulnerable to market volatility. The gapping actions characteristic of the first trading hour after the opening bell produces a lot of anxiety for traders. The stock prices can have wide fluctuations that may cause a trade to be stopped out unintentionally. On the other hand, binary options are not affected by the price fluctuations since the only relevant event is the actual price during expiration. Of course, there are special types of binary options such as the Touch option, offered by brokers such as TraderXP and AnyOption, where traders can take advantage of the volatility. With Touch options, an investor is not concerned with the expiration value of the price, but whether or not the price of the underlying security has reached a predetermined price point. Of course, the investor is anticipating that there is going to be significant volatility in the market to drive the price of the stock to the target price, or to "touch" the target price prior to expiring. With risks predefined to a known value prior to any trade coupled with the potential to make huge percentage gains within a relatively short time span, binary options trading is an attractive alternative to traditional markets.
Binary Option Brokers
Binary option trading is an emerging market. The leading brokers continue to add features to their trading platforms to ensure their clients gain that trading "egde". When selecting a Broker, take a test drive of the broker's trading platform to assess its stability, its real-time response and its offerings in technical analysis and charting capabilities. Here is a list of leading binary option brokers to evaluate: