Binary Options

Pick a Direction and Make Money
Trading Binary Options
What are binary options and why are they so popular with traders today? We'll take a few minutes to look at these fascinating securities and try to explain why they truly are the investment for the retail day trader. The word we'll be repeating often in this piece is simple, and it shouldn't take you long to understand why.

Binary Options: The Simple High Return Investment

The reason why so many people are choosing binary options are their day trading investment of choice many times comes down to simplicity. Today's complicated computers and algorithms make investing in the broader stock market no longer viable for average joe everyday human day traders. Computers can run day and night, don't require sleep or bathroom breaks, and have no emotional attachment to their positions. Retail day traders therefore needed an investment that didn't require constant monitoring, was extremely short in duration, and didn't require complex math to determine if now was a good time to buy or sell. What day traders needed was a simple, short term, high return investment. What they got were binary options.

Anyone Can Pick a Direction

How is it that binary options are a simple investment to trade? Well put it this way... can you pick a direction? Do you know the difference between up and down? When making a trade with a binary options contract - that is essentially all you are doing - making a determination on the direction of a stock, index, forex rate, or commodity. If you pick up (a call binary option) and the stock finishes up at the end of the contract (even if it is just 1 cent) - you win! It's hard to beat that kind of simplicity. It doesn't seem like being right by just 1 cent would make money as a trading strategy, yet binary option contracts don't care about how far right the trade is... they pay out a fixed return (around 70% usually) regardless of how right the direction pick was.

The Dollar Store Investment

Another thing average people really hate about buy stocks is the fractions and pricing of shares. Shares outstanding, share price, stock splits, share buy-backs, executive options all seem designed to confuse average investors and swindle them out of their hard-earned money. Binary options on the other hand are made in even dollar amounts, and the amount of your investment is the size of your contract. The math pretty much stops there. No figuring of market capitalization, no ratios, no sifting through thick 10K reports trying to find that elusive executive golden parachute clause, none of that crap. You invest $200 in a binary options contract, you own a $200 binary options contract: that's it.

The Simple Way to Create Effective Hedge Trading Strategies

One of the secrets investment banks don't typically like to share is that they design their own trading strategies around the idea of winning either side of the trade. More often than not investment banks try to bully each other and other market participants into giving up their positions at a loss or making you pay through the nose for over-valued securities. Many times the reason they are able to do this is that they have the advantage of having the capital to play both sides of the trade for indefinite amounts of time. They can wait for you to be weak to cash in on one side of a trade then bide their time for market strength to cash in on the other side of the trade.

Wouldn't it be nice to win on either side of the trade? That's called hedging, and while perfect hedging in binary options is not possible, it IS possible to make lower risk / two sided trades. This strategy has become so popular in fact that they invented special kind of contracts called double barrier options. Bottom line is that binary options trading is a simple to understand investment which pays high returns without a lot of maintance or complex math. All you need to start in most cases is $200 and a binary options broker.