Binary Options Introduction – What They Are

In the world of investing, a potential investor has a wealth of resources, tools, and methods at his or her disposal. This was not always the case, but with the advent of the Internet and the advanced technologies and increasingly-sophisticated methods in use today, trading is more powerful than ever before.
One of the hottest trends in trading today is found with binary options – an exciting way to make money based on market movements. This form of options may seem exotic to some, and is not as commonplace as other methods of option trading, but it is quickly catching on, especially with online trading platforms.
This article will give a brief introduction to binary options and how they are used today.

What Are Binary Options?
Before we talk about binary options, we first will cover an option – of which binary options are one type.
An option is basically a contract between two parties to buy or sell an asset at a certain price during a certain period of time. When it comes to currencies, an option is a contract to buy a particular currency at a particular price by a particular time, say, EUR at 1.5 USD before the option expires on April 1^st.
A binary option has two possible outcomes: a fixed payout amount or nothing. Other names for these include all-or-nothing options and digital options, particularly in the forex option community.

How Binary Options Work
Fundamentally, binary options operate very similarly to regular options. When you invest in a binary option, you are basically taking a position for or against a particular outcome. If you meet that outcome, then you receive a fixed payment; if you do not meet the outcome, you lose the amount invested in the option.
For example, let’s say there is a binary option that pays out 81% and states that EUR/USD will close above 1.5000 by April 1^st. If you take the call position, you believe that this outcome will occur; if you take the put position, you are betting that it will not occur, in other words, EUR/USD will close below 1.5000 by April 1^st.
Most binary contracts pay out around 75% – 85% of the trader’s investment amount; so, if you were to invest $100 in the EUR/USD binary option mentioned above which pays out 81%, you could receive a potential gross profit of $81.
As you can see, binary options are extremely attractive methods for those who want to earn a lot of money without a lot of risk.

Conclusion
Binary options have a lot of potential for traders who want to earn a profit without navigating the often-risky up and down world of forex  and stock trading. Learning more about binary options could open up the doors to potential profits for a savvy investor, making them worth a shot.

How to Choose Binary Options Platform

1. 
   
   Choose a binary options trading platform that offers at least 65-70% returns - One of the many advantages of binary options trading is that the pay-out is determined in advance so the investor is completely aware of what they would earn, or even lose before the expiration of the option. To reap the benefits of a earning with binary options you only need to be in-the-money by 0.001, whether the underlying asset’s movement was great or small. Given this, you should ensure that the binary options trading platform you choose will give you the biggest pay-out possible so you can maximize your earnings. After all, if you could get more for your money, why wouldn’t you?
2. 
   
   Trade on a platform that offers a return, even when the outcome is an out-of-the-money result - As frustrating as it is when you are presented with an out-of-the-money result, all may not be lost if you trade with a site that offers investors a payback, even for a disappointing outcome like this. There are binary options trading platforms, few that they are, that do offer as much as a 15% return on all out-of-the-money results which is a great advantage to consider when narrowing down different trading platforms choices to suit you.
3. 
   
   Choose a trading platform that offers a wide range of assets - With the media being a great tool for investors trading in binary options one can keep up-to-date with news of movements and fluctuations in the main markets. Financial news reports and online figure charts provide a good scope to make backed decisions when making a bet. This said, the wider the options of assets a site has to choose from and the more known that the assets are provide the investor with better ground when all fingers from outside sources are pointing to particular movements. You wouldn’t want to limit yourself to a site that has slim pickings when there are those who can open the doors to a wider and richer choice.
4. 
   
   Be aware of platforms with excess charges - With money coming in and hopefully not too much going out, the last thing an investor needs from an online binary options platform is additional charges that may be applied for things like depositing money. Look out for sites that charge extra for these things and luckily there are sites that charge no such fees.
5. 
   
   Select a trading platform that has a promising customer service obligation - Whether you’re just a beginner or old-hat at trading binary options, there may be times when you will need advice or support when trading online. Whether it’s technical queries or some simple guidelines, a good customer services team is an important factor when choosing a binary options trading platform and can be an essential piece of the puzzle in smoothing over some lines, making way for some successful returns. Many sites have local help-line numbers for every country they service.
6. 
   
   Use a trading platform that resources good security measures - Now this is important stuff. For your binary options trading platform to be completely safe for you to use, the most necessary element to look out for is encryption, being sure that it is equipped with 128 bit SSL encryption from a market leading security provider. This acts as your only protection against online theft.

How to Get Started With Binary Options and Binary Options Trading.

1. Understand the terminology of options trading. Binary option trading is when a buyer enters into a contract to purchase an underlying asset at a fixed price at a pre-determined time in the future. The owner does not buy the asset itself, rather the option to buy it. The fixed price at which the owner buys or sells at, is known as the strike price. In binary option trading, the potential gain or loss is known at the onset of the contract and it is determined by the amount invested by the owner. So, there are only two possible outcomes: the option expires in-the-money and the owner receives the value of the successful contract; or the option expires out-of-the-money and the owner receives nothing, taking the loss of the price paid.
   
   
2. 
   
   Investigate the underlying asset. This may or may not be an "asset" in the usual investment sense of the word, but refers to whatever will determine whether or not your contract expires in or out of the money. The contract might look like "Pays $100 if the S&P 500 Index closes 2012 above 2000." Some prediction markets offer contracts based on political, meteorological, or other non-financial topics such as whether or not the Higgs Boson will be observed by the end of 2013. The market value of a binary option is directly related to the probability that it will expire in-the-money, with (usually minor) adjustments to account for other factors, such as the time value of money, taxes, and commissions. The Black-Scholes model for options pricing may apply if its assumptions are valid and the volatility of the underlying asset is known.
3. 
   
   Decide if the option is overpriced or underpriced enough to act on. If it is underpriced, place an offer to buy; if it is overpriced, sell. The exchange probably won't allow you to make a naked short, but should allow covered shorts, if you have enough cash in your account. In binary options, a covered short is equivalent to buying both an option for "Outcome A" and one for "Not A" whose total value is constant, then selling whichever one you think is overpriced.
4. 
   
   Monitor your option and the underling asset after purchase. You may choose to hold it until expiry, or sell it to another investor before then.