Making money is no simple feat; any working professional today will tell you that you will need to put in long hours and significant efforts in order to bring in a substantial income that can enable you to cover all of your necessities, set enough aside for emergencies, and indulge in a few occasional luxuries. In many cases, it may mean taking more than one job or cutting down on certain expenses just to make ends meet.
For those who prefer not to work themselves to the bone just to generate enough income to live comfortably, trading has become a viable money-making option. It comes in different forms and all of them have varying learning curves, but with enough dedication, determination and a unique strategy, it can definitely pay off after some time.
One type of trading that is catching the eye of many budding traders today is binary options trading. As it name suggests, binary options entail speculating on the direction that the future price of an underlying asset (such as index, commodity, stock or foreign exchange) will take, and there are only two possible outcomes: either the asset will rise in value or it will drop in value.
A strike price is a notable component of binary options trading. A trader purchases a “call” if he thinks the market is going higher; if the price goes above the strike price at the time of expiry, the trader makes money. On the other hand, if the trader believes the market is going down, he’ll buy a “put” and if the price falls below the strike price by the indicated expiry time, the trader also makes money.
To get a better picture of how to trade binary options, it’s worth looking at a trading example that can illustrate the different points. Say, for example, that a trader thinks the share of a company is currently too high and is bound to come down soon. He has $200 in his account and uses it to buy a binary put option on the company. Expiry time is set for one hour later, with a payout of 70% if “in the money” and 15% return if “out of money”. The company price (strike price) at the time of the trade is $600 per share.
The trader’s option will be “in the money” if the company’s stock price starts falling from $600. The payout he can expect is $340 ($200 investment plus $140 profit). However, if the company closes above the strike price of $600 at expiry time, the trader will only receive $30 (15% of the $200 investment) and a $170 loss.
It’s important to note that how much the company’s stock price falls is irrelevant; whether the price drops or falls by one penny or a hundred dollars by the time of expiry, the return will be the same — which is why binary options are also called fixed-return options.
Navigating the world of binary options trading can be relatively simple compared to other kinds of trading, as long as you put in the right amount of time, study, and practice. Fortunately, there are demo accounts that you can use to hone your trading skills without parting with your money. By learning binary options trading, you can find a way to supplement your main income and achieve greater financial stability for you and your family.