Teach Me to Trade - a Short Article About Making Money Trading Options
"Teach me to trade!" is something I hear over and over again whenever the conversation shifts to the topic of making money... yet I can't simply impart the knowledge built up over two decades in a two minute conversation. On the other hand I have found a way to convey much of the information about making money trading options by way of a little know but simple to understand investment called a binary option.
The Binary Option - Simple, Obscure, and Lucrative
Any option trading tutorial would be incomplete if it didn't mention a simplistic form of options trading called binary options trading. Not too many investors know about this form of investment but it is a very hot market right now for people not willing to be stuck with long holding period investments such as stocks, bonds, mutual funds, traditional option contracts and futures. You may look on the web for another option trading tutorial if you want to know about the more common form of contracts trading. This option trading tutorial will focus only on binary option trading.
Binary Contracts Simplify Choices and Outcomes Binary contracts are, like the name implies, bi-polar. Either you choose the "up" side of the switch, or the "down" side. You might think of it similar to any two-sided choice - yes or no, true or false, heads or tails, on or off. In this case the binary switch refers to up or down movements in a stock, currency, or index.
How it works is that you, or I, or any investor with a binary options trading account picks one of the available securities to trade (not all securities are traded... only the highest volume securities are traded this way) and selects how much to invest.
Small Movements Yield Big Outcomes without Dangerous Leverage The really fascinating part about this sort of transaction is that it does not matter how much the stock moves... the only thing that matters is the direction. If the binary option trading contract is for a 75% payout on an up movement of a security on a $100 investment and the stock is up even just one cent at the expiration of the option, the investor receives $175 ($100 invested plus $75 profit).
So in summing up this binary option trading tutorial: Trades require the investor to choose only how much to invest, which security, and which direction.
Questions and Answers
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