The term binary options can be heard or read more and more often in the financial sector. This is a fairly new trend that is gaining more and more followers. But what exactly are binary options by definition and what is the explanation for binary options are essential to understand. In any case, it should first be noted that the products belong to the speculative investments and are to be classified under the category of derivatives. On the one hand, playmarketstore.com/iqoption binary options have a lot in common with the classic options available on the market, but differ from “regular” options in a few important respects. The term “binary options” was chosen because there are only two “possibilities” in this type of speculation,
How does binary options work?
Many newcomers to this field still want to know how trading these particular options works. Although there are now several types of trading in binary options, the best way to explain how they work is to use simple call and put options. First of all, every binary option is based on a financial instrument, which is referred to as the base value or asset. This can be a stock, an index, a commodity or a currency. Options trading is about the performance of those assets. So the trader first chooses a base value on which he would like to speculate using the binary option.
Profits and losses in binary options trading
The trader has to decide on three things, namely a base value, a term of the option and whether the price will rise call option or fall put option. For example, if the trader has bought a call option with gold as the underlying and the gold price is higher when the option expires than at the time of purchase, the trader usually makes a profit of between 70 and 90 percent. On the other hand, if the price at expiration is lower than when the binary option was purchased, the trader has lost his stake. Unless the broker offers a so-called loss protection, which can usually amount to up to 15 percent. You can try it out very well and without risk with a binary options demo account without deposit.
As with binary options, traders can use classic options to bet on rising and falling prices. If you make the right decision, you win. Another benefit of options trading is the use of leverage. So you can already trade large sums with little capital investment.