Can I Make Money Trading Binary Options

Recently there have been a lot of websites showing up that offer people the ability to trade binary options online. Most of these sites are advertised over the internet using Google Adwords or on pay per click sites such as Neobux.

When people notice these ads, they are naturally intrigued to wonder what are binary options, and how can I potentially make money with Binary options online? So this article is meant to help teach people what binary options are, and how to make money over the internet using Binary options. For example. Brokers such as www.eztrader.com sell binary options to people over the internet.

So an option is used with stocks. It gives the buyer the right but not the obligation to buy or sell a stock at a certain price. There has to be an expiry date on an option, so the option purchaser has to decide if he is going to use the option before the expiration date, or else the purchaser loses the right to buy or sell the stock that was paid for, called a premium.

There must also be a strike price associated with an option. This is basically the reference price which determines profit or loss on the option.

A Call options gives the purchaser the right to buy a stock. Thus if the stock goes up, a call would make money. If the stock went down, a call option would loose money.

A Put Option is the opposite of a call option. So if the stock price goes up, a put option would loose money, and if the stock price goes down, a put option would make money.

The purchaser can either use the option to buy or sell the stock, or the option itself can simply be sold. Usually the option itself is just sold and that’s where the profit or loss is calculated.

However, binary options are similar yet different. They are similar in the fact that the binary option is based on the underlying stock price, and the purchaser makes money or loses money depending on whether the stock price goes up or down. However, binary options are much simpler than traditional options. You see, they are called binary options because there are only two possible outcomes (and binary means two choices). If the stock price goes up above the price where the option was purchased, you profit on a call and loose on a put option. If the stock price drops below the strike price the purchasers profit on the put and loose on the call.

Now the Binary options expire generally the same day or within hours of the sale, so they are a short term play. Also, unlike regular options, the brokers tend to offer fixed rates for each binary outcome of the options play, no matter where the price goes. For example, the options broker may sell a $100 call option and offer to pay $8 if the stock goes down by any amount, and pay $175 if the stock goes up by any amount. With a regular option, it does matter how much the stocks move, which determines the amount of the profit. With Binary options, it does not matter how much the stock prices moves, the only thing that matters is whether or not it moves up above the strike price or down below the strike price. Just do a search for eztrader review to see what bloggers have to say about brokers.

Now that you understand that the options brokers pay fixed rates based on whether the stock’s price goes up or down, you can get a feel for whether or not you can make any money using Binary Options. Since binary options only have 2 outcomes (up and down, profit and loss) and the rates are fixed (lose 93% or win 160%) you can tell that the basic expectation of winning is very slim. For example flipping a coin: half the time you win, half the time you loose. If you lost everything when you loose, and doubled your money when you win, you’d always break even. So, if you look for a broker that pays you more than 200% for wins, chances are that you can make money with binary options. If the broker pays anything less than Double for winning options trades, that means that you need to be right more than 50% of the time, so I hope you have a crystal ball. Good luck with binary options!

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