5.4.1 Binary Options

Instruments and Platforms

Let us look at Binary Options – A subsection of the full options contract.

The 1st question that you got to ask yourself when you trade binary option is, has the price of the instrument gone over a certain price over a define time period. The few things to note are:

  1. Trade price – In the options video, we spoke about the trade price being a certain percentage of the strike price and the strike price being the price of the underlying instrument.

  2. Expiration price – Expiration price at the point when you are choosing to sell the options contract as you are not obliged to.

  3. Difference – the difference between the trade price and expiration price. For example, the trade price that you bought at was basically $60 and the expiration price that you sold it was $100 and naturally the difference is $40 of profit.

That is the main thing about binary options but of cos the terminologies that we learn in the options contract of known price, strike price and known asset is all also used here in Binary options. The only difference is the way Binary options are traded. The price that you need to ask yourself is totally in a different concept.

Let us move on to the live examples.

Here we are on the Binary options platform. As we have discussed before on the options module, you can see that to place a trade on the live charts order ticket, you got to ask yourself the following:

  1. How long you want to be on the trade for that you stake is going to be valid till? For example, if you say it is going to get higher in price (for the next 5 ticks, minutes or hours) that the current price, for the particular instrument that you are trading, you will then get a particular payout. However, also, if you say it is going to get lower in price within the specified period, you will get a certain payout.
    Example: Trade going Higher
    If it is going to be $20 currently, and then it goes higher within 5 hours, you will get the particular payout price.

  2. You basically looking at the direction. If you get it right, then you will get the particular payout. However, if you are wrong about the direction, you will loose the stake size that you are in.

That is binary options in a nutshell. Do go and take a look at it yourself. There are very few platforms that are offering it at the moment. Do also look at the regulations in the area you are trading to see what they offer.

You have to remember that whatever instrument you are trading, make sure you have your risk management in place and that is also in our education centre as well, which we look at in more detail in risk and protecting yourself.

Just to summarise, this is an example of how Binary options work and how in real time you will place an order based on analysing the chart of the current instrument that you want to trade on. You can use any other charts to analyse it. For example, you can use SAXO traders to analyse it. After analysing you can place your binary options trade.

Go ahead and find out how you will use it and familiarise yourself with the concepts

Subscribe today to join our live trading room and watch us trade in real time with our team of professional traders of over 38 years of cumulative experience.