What are Binary Options and is the same as forex trading ?

It’s not been so long since binary options trading have emerged as trading vehicle in the trade market of United States. Though these financial options have earned popularity and fame in the markets of Europe and all over the world but still in United States the concept of these options is relatively new. In United States binary options were listed in the list of trading option in 2008.

By definition, these financial options are defined as, type of trading option in which there are pre structured payoffs, by trading such options you either earn a fixed amount if option expires in money or if in case the option matures out of money you will earn nothing. The concepts ‘in the money’ and out of the money’ have two defining dimensions. For a call option, if the strike price of option is less than the underlying asset’s market price we will refer it to be in the money. On the other hand for call option if strike price of option is higher as compare to the market value of underlying asset it is said to be out of money. Similarly for put option in the money is said to be occurred when strike price of the option is more than the value of underlying assets and out of money is said to be occurred when for put option the strike value of option is trading below the market value of asset.

As an investor one does not have to be afraid of involving in the trade of binary option because financial investment made in these options is simple and uncomplicated. Through the trade of these options the investors would either make predetermined return or else investor would make nothing. Just like standard vanilla options the components of binary options i.e. strike price of the option, maturity or expiry date and value of underlying asset, commodity or security, need to be examined before investing. Before investing on these financial tools an investor needs to decide that whether to opt for call option or put option.

Binary call option also called digital call option is practiced when investor assumes that the price of underlying asset or security will rise during the purchase to maturity time. If you are predicting bullish trend in the market, specifically for your underlying assets than the call options are the best choice. As binary options are transacted for relatively shorter period, therefore call option can also be transacted in bearish market because of the fact that the bear market can experience short term fluctuations. Binary put option is transacted with the assumption that the price of underlying security or commodity will fall during the period of option purchase time and expiry time. Binary put option will earn predetermined amount of return only if the market value of underlying asset will drop down. In bearish market transacting binary put options is recommendable due to the fact that as a result of bearish effect it is generally perceived that the value of most of the securities and commodities will fall.