It seems that no matter where you look in the financial world today, everyone is talking about Binary Options. There are a number of ways in which you can trade on the financial markets but this form of trading has proven to be one of the most popular. So what, if any, are the attractions of using this form of investment to trade on the financial markets?

To understand why trading with options contracts has become so popular, we first need to take a look at how it works.

The basis of this form of trading is the binary contract which pays out a fixed return at a set time of expiration. In order to earn this return on your investment you will need the contract to expire with the obligations intact. While this may sound complicated at first it is in fact a very simple concept to understand. You see with binary options you only need to for the market to finish higher or lower than the price at which you enter the market at the agreed expiration time of the contract. You purchase a Call contract if you believe the market will finish higher and a Put contract if you believe the market will finish lower.

When the contract expiries if you have been successful in your analysis you will finish with an 'in the money contract' which will entitle you to a pay out of the set profit. If your contract is unsuccessful then you finish 'out of the money' and do not 'earn the quoted return. The final possible exit is that you finish 'at the money'. This is where the market level finishes at the same level as you entered. In this scenario you do not receive the profit but are refunded the price that the paid out for the binary contract.

Knowing what you stand to profit before you even enter the market is one of the great attractions of this form of trading. This is a great way to trade for new traders who will be aware of the potential risks prior to even opening a position in the market. In addition, as you only have to call the market higher or lower, you do not need to know any great detail about the market. Of course being able to correctly analyze a market will help, although you only have to be able to forecast if it will move higher or lower over the time period that you select.

Trading is carried out over short periods. This is another top reason that it proves so attractive. You do not have to know the long term prospects for an asset as you are only interested in what it will do by the point that the contract expires. Most contracts that you can purchase on binary options will only run for a matter of minutes. While you can select contracts that run for longer time periods, most people like the fact that they can receive a pay out from their predictions quickly and so have the opportunity to make fast profits on their accounts.

You can start out trading on binary options reliably easily and with a low capital deposit. All you will need is an account with a binary options broker which can be easily opened online. Once your account is opened and you have deposited some funds then you will be able to start trading on a range of available assets to build your investment returns.

Source by Philip D Moore