The structure of trading binary options has led to its growth in popularity over the past year.  Together with the simplicity of the online binary options trading platforms and the benefits that binary options provide over traditional options, the explosion in this industry comes as no surprise.

Firstly, understanding how to trade binary options is vital before you begin trading. Below I will describe how a typical binary option trade would work:

Step 1: decide which asset you would like to purchase. Choose whether to purchase stock options, commodity options, forex options or index options.

Step 2: select your expiry time which may be the end of the nearest hour, day, week or month

Step 3: choose whether you think the asset’s price will go above or below the current price. This price is constantly moving with the market so it advised to analyze the price using the tools available on the website (if available)

Step 4: purchase your binary option for the desired amount and wait for the expiry time to show the asset’s price

Trading binary options has two possible directions – above or below, known in the industry as Call or Put.
A Call binary option is bought when an investor thinks that the price of his asset will rise above its current price.
A Put binary option is bought when an investor thinks that the price of his asset will decrease below its current price.

Depending on which binary option trade he bought will depend on whether it expires in the money (successful) or out of the money (unsuccessful).

In the money – this is when the option expires above the bought price in a Call binary option or below it in a Put binary option.
Out of the money – this is when the option expires below the bought price in a Call binary option or above it in a Put binary option.

The payback received when trading binary options will depend on the price stated at the time of purchase. This is different on each online trading platform and varies between each underlying asset and expiry time, however it is normally between 60-70% for in the money binary options. Some platforms offer a refund for those options which expire out of the money. These differ from 5-15% refunds, again depending on the online trading platform.

So, the steps involved in trading binary options are relatively simple. Once an investor has done his research, he can carry out the trade from his own computer, without the need for an intermediary and he can trade his binary options in an instant.

© 2010 – 2011, Binary Options – Binary Options Trading. All rights reserved.