One way to look a binary options is to think of it as trading made simple. While many may take one look at the first word of binary options and seize up with fear over a word that clearly sounds like a math or technical / computer programming term, the truth is that these high return investments are far from being complex. The reality is that a more apt comparison would be that of a coin-flip.
How Is Trading Made Simple with Binary Options
Once an investor seeking high return investments gets past the initial phobia associated with the technical name of the asset they soon come to two conclusions. The first conclusion is that contracts of this kind have virtually all of the complexity stripped out of them. The second conclusion the trader comes to is that these are indeed very high return investments with quick turnover – making them both risky and at the same time potentially more lucrative than your more traditional run-of-the-mill securities.
Trading Made Simple with Easy Win-Lose Scenarios
The basic concept of trades of this kind are this: the trader decides whether a well-known stock, commodity, or other highly liquid asset will rise or fall before the end of the day. A small investment is then made (anywhere from $ 10 to $ 3000 for example) wheree the investor puts a fixed dollar amount down and buys a call if he or she thinks the asset will rise in price or buys a put if the belief is the asset will fall in price. Profits are calculated based on a pre-determined fixed yield and paid out if the trader has guessed correctly on the direction of the price movement. The trader does not care how much the price moves, only which direction . The investment return is not obscured by complexity such as the number of shares or some sort of fractional computation. The trader spends a fixed dollar amount and earns a fixed yield if correct.
High Risk Assets Offer High Yields
The flip side of earning a high yield if the trade lands in the money is the high risk associated with having the trade expire out of the money. This is a fundamental risk when dealing with binary options. The lure of course then is to offer yields high enough to compensate for the elevated level of risk, in most cases this means 60-80% on most contracts. This is high risk trading made simple for those wishing to try to earn high returns in a short period of time.
Source by Steve B Wise