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by Allen Oneil
on July 13, 2021
You probably heard the word binary trade tossed many times around you. Now you have this word embedded inside your head.
You might be wondering: What are binary option and how do they work? Numerous people jump into the world of binary option just by getting attracted to its merits.
They often make do by imitating others. This is nothing short of a serious mistake. We are assuming you want to be a person with a strategy treading towards his goal.
Today, Safe trade binary options give you a basic overview of binary options and how they operate.
What are binary option and how do they work?
Binary Options: The definition
A binary option, like the name suggests, is based on just two outcomes- a Yes or No. What do you answer 'yes' or 'no' to though?
The question is: will the price of this asset be more or less some time in the future? All you do is open a contract at the bidding price.
Successful bidding whether you buy or sell a contract would give you $100. An unsuccessful one would give you nothing. You can visit the safetradebinaryoptions to know details.
Instruments
Three factors of operation in a binary option include:
The market
No trade ever happens without a market. Binary trade offers the following market:
- Forex
- Stock indices
- Commodities
- Events
Strike Price
A price at which you execute a contract for an asset. An asset is also an important factor
Expiration
The date and time of an executed contract. An expiration price is the proof of the asset when the option executes.
The operation
We will not hand you a roadmap and ask you to follow it blindly. Follow us with a hypothetical situation instead.
Suppose a man named Ben entered the binary options market for palm oil. A contract for palm oil says that its price will be $20/ gallon on March 10 at 3:00 p.m.
The bid is $50. Let us assume Ben to be optimistic about the contract. He buys this contract instantaneously.
This means that Ben believes the market price to be above $20. When the contract expires, one of two things will happen:
If the gallon of palm oil remains or surpasses $20, he will get $100. He will make a profit of $50.
- If the gallon of palm oil does not surpass $20, Ben would not receive anything.
- Ben incurs a loss of £50.
Notice that the market price does have any impact on the money you receive. The money that you bid to open the binary option does.
Final Thoughts
The money you receive in binary trading ranges from $0 to-100. This depends on the success or failure of your bid.
You must be clear about what are Binary Option and how do they work now. If so, try to reverse the situation.
Think what happens when Ben is less confident about the market and sells his contract.
We hope you would be able to answer. We hope this guide would get you started on your expedition to the world of binary options. Good luck!
Posted in: Online Trading, Binary Options
Topics:
forex trading, binary options