Binary options are becoming an increasingly popular way for individuals to profit from movements in the equities, commodities and forex markets without having to assume large amounts of risk. Since their introduction in 2008, binary options have established themselves as an excellent vehicle to access markets that have traditionally had a more difficult barrier to entry, as well as a less complex way to enter the options market. For those interested in exploring binary options, there are a few things to consider before opening an account and learning how to trade.
What are binary options?
A Binary is a simple yes or no question where an individual takes a position that an underlying asset price will either finish higher or lower than some other price level within a defined time period. The word binary comes from Latin meaning two, which is why there are only two possible outcomes at expiration.
Only one side of the binary transaction, the buyer or seller, can be eligible to receive the expiration payout of $100 per contract. There is no intermediary as the buyer expects the underlying market price to finish higher than the predetermined price level (strike) and the seller expects the opposite.
The binary trading platform is very transparent and easy to understand. Where your risk and profit lie on each trade is clearly defined so the architecture of the trade makes the binary an attractive option.
Users can access the most heavily traded markets through an exchange like Nadex, the first and largest regulated binary options exchange in the United States. Nadex offers binary options contracts on stock index, currency and commodity futures that have hourly, daily and weekly expirations.
The advantages of trading binary options
For individuals interested in learning how to trade or seasoned traders, binary options provide a low cost, low risk and easy to understand way to hone their skills and better understand the equities, currency or commodities markets. Specifically, binary options trading through Nadex offers several unique benefits that also provide an exciting trading experience.
- Trade with confidence from limited risk: Binary options enable traders to see exactly what can be made or lost on each trade, providing a level of transparency that does not exist with other trading instruments
- Low collateral required to trade: The contract sizes for Nadex binary options are small. Each contract has a maximum expiration value of just $100 so it makes these trading instruments ideal for both the novice trader as well as the more experienced trader. For the experienced trader it gives another trading tool to add to his tool chest to supplement his trading
- Opportunities in volatile or flat markets: While little movement in the broader financial markets can hamper the ability for traders to make a profit, with binary options even the most calm markets present strong opportunities for financial gain
- Multiple daily trading opportunities: With hourly contracts available throughout the day, traders can take advantage of breaking news and trending markets to reap rewards
Choose your binary options provider wisely
If you are interested in exploring binary options, you should be sure to trade through a provider that is U.S. based and in accord with the Commodity Futures Trading Commission (CFTC) regulations, for your protection. There are many off-shore brokers that provide no guarantee on your capital, as it is held outside of the U.S., while requiring a substantial upfront deposit. Be warned as there have been several instances of these binary brokers being accused of providing fraudulent or scam services, and if you are defrauded there may be little that regulators can do to protect you.
Nadex is subject to the regulatory oversight of the Commodity Futures Trading Commission (CFTC) and holds all funds in a segregated bank account at BMO Harris in the US. By providing full transparency on every trade, ensuring an easy withdrawal process, and acting on behalf of its traders’ best interests, Nadex is a secure and easy way to trade binary options in the United States.
If you’re interested in trading binary options you can open an account with Nadex in less than five minutes. It’s free to open and there’s no obligation to trade.
Futures, options and swaps trading involves risk and may not be appropriate for all investors.