What Are Binary Options ?
Binary Options have been in existence for a considerable period of time and the popularity keeps on growing day by day. Binary Options are a form of trading whereby an investor or trader speculates the value of a financial instrument traded in the financial markets. The options are cash values or asset values placed on market instruments such as hard commodities like precious stones, soft commodities like agricultural products, market shares and other financial instruments. When a trader sells or buys an option, he only buys the value and not the physical product itself; notable products traded include gold, silver, shares and minerals among other products.
How Binary Options Work ?
The goal of trading in binary options is to create an income source as well as generate wealth by making a gain on an option; the trade is based on speculation whereby a trader will place a value on an option. A trader may either predict a price decline or a price increase and in case his speculation is right, the trader gains. Just like gambling or betting, binary option trading is a game of chance thus a trader either gains all or nothing. If a trader predicts the market to be bullish he will take advantage of this and buy options which is what is referred to as call option ,and in case he speculates a decline or bearish market the investor will opt to sell off the options before expiry of the trade in what is termed as a put option.
Mechanism of Binary Options Trading ?
This form of trade always takes place within a defined period of time, the option needs to be called or put on offer before an expiry period which range from 30 minutes, 60 minutes, hours and till end of day for normal binary options. Some options might take as long as a month or quarterly, these are referred to as vanilla options. For instance, if a binary option on gold has a value of $ 600 and trader speculates the price to rise, he will place a bet of $100 and if at the time of expiration the price rises by as little as $ 1, the trader will gain the $ 100 but if the prices falls to $ 599 or lower then he loses the wager of $ 100.
Similarities between Binary Options and Online Casinos / Gambling
Binary options trading and gambling share a myriad of similarities, this include the following:
Expiration or maturity period : A transaction whether binary option or placing a bet in a casino will be pegged on a specified period of time in which a trader is supposed to exercise his rights lack of which leads to a null trade.
Game of Chance : Both forms of trading are based on uncertainties thus no surety of making a gain or loss, the decision will be influenced by market imperfections rather than the trader’s knowledge.
All or Nothing : Trading with binary options or gambling in a casino always have two extreme ends, you either win all or lose all consequently no softer landing offered due to partial alternatives.
Money Making : The goal of the two trading options is attributed to making money and nothing else. The trader will try to make as much money as possible in the shortest and quickest time period since the next trade is not guaranteed.
Online Platform : The trading is carried out through the internet for both binary options as well as online casinos.
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