Effects of Market Volatility on Binary Options Trading

Previously in the article "The Importance of Analyzing Charts in Binary Options Trading" we discussed which type of charts are most practical to use when doing your research.  In this article we are going to discuss the effects of volatility on prices and on your analysis of the markets.

What is Market Volatility?

Simply put Market Volatility is a term used to describe the markets or a single Asset whose price is extremely erratic; sharply rising one moment then dramatically dropping the next.  Often times, it is hard to identify the Trend Line as the price of the Asset changes so rapidly.

Day Traders love volatile markets as they will buy when the price drops then wait a few minutes and sell when it dramatically swings higher.  However, Binary Options traders need to be very cautious during times of a volatile market as these dramatic price swings could swing Out-of-the-Money at the very last second of the Trading Period.

Selecting the Right Asset

Selecting the right Asset during a volatile market is essential to a successful trade.  Carefully study the Trend Lines of all of the available Assets and find an Asset that is not affected by the large price swings.  The ideal Asset is one where the chart shows the Trend Lines are long and steady and not switching up and down every few minutes.

As of the time of this article Binary Option brokers offer a limited number of Assets for trading.  Brokers are continuing to add more Assets each month as they develop their market profiles.  As a result it may not be possible to find an Asset which hasn't been affected by the market volatility.  If this should happen just sit back, do your research, and do not trade that day.

Ride Out the Storm

Often, traders refer to high volatility as a market storm.  It is easy to see why people would feel this way as it is best for the arm chair investor to leave this type of market movement to the professional traders.

Many professional investors have told me that when the market starts to swing wildly and the volatility level rises dramatically trading is being accomplished by automated trading programs that are using preset values to make the instantaneous trades that are needed to keep up with the wildly swinging market prices.

Controlling High Volatility

Fortunately, most market authorities will start to slow down trading by restricting the number of trades allowed in a given time period and by slowing down the data streams of trading results.  In rare cases market authorities have halted all trading in their respective trading house.

In most cases, the market authorities will halt trading on one or more Assets that appear to be driving the volatility instead of halting the whole trading house.  Halting one or more individual Assets is the most preferred action since it has less of an effect on other global trading houses. When a whole trading house is halted it tends to start a ripple effect throughout the whole global economy.

Watch for the next article in the Binary Options Trading series, "Bollinger Bands and Moving Averages Used In Analysis".  We will discuss how to use Bollinger Bands to analyze market volatility.

Binary Option Trading - An Easy Way to Earn Extra

Many business enterprises have shifted their focus to the web market over the last decade. Today, the Internet serves as an avenue for all sorts of commerce. Binary option trading is one of the newer moneymaking opportunities available online. The number of sites offering this service grows in number daily. Keep in mind that just like any other business venture, this undertaking has its risks and advantages. Before you invest your hard-earned money in this trade, it is important that you learn as much as you can.

Basics of the Trade

The method of practice is what sets binary options apart from other ecommerce opportunities. It is different from ordinary trading in the sense that an investor does not have to own any assets. All you need to get started is an initial investment. The process that goes into it is straightforward - traders have to predict whether a certain asset's value will appreciate or depreciate. For example, when trading for Enterprise 1, you do not have to own any company shares. Instead, you gamble with your initial investment. What happens is that you sign a contract, and then try to forecast whether the shares of Enterprise 1 will increase or decrease. Your ability to determine the result will tell if your investment registers a loss or a profit.

History of the Trade

People who have just stumbled upon it think that the concept is brand new. Contrary to popular belief, however, binary options have been around for several decades. It only seems new because formalization of the trade only took place within recent history. If we were to discuss options trading in general, the practice has been around for thousands of years. On the other hand, the practice, as we see it today, dates back only to the nineteen-seventies.

Formalization of the trade took place in 1973 by the Chicago Board of Exchange (CBOE) and the Options Clearing Corporation (OCC). The process today adheres largely to the regulations set up by the CBOE and OCC.

Risks and Advantages

As with all markets, binary option trading fluctuates. This should be the deciding factor as to how much money you invest. Of course, the general rule is not to invest money you do not have. Some people fall into the trap thinking it is easy money. While it can be, there are still risks involved. Be wary of this fact. Do not throw in all of your money at once. Instead, familiarize yourself with the practice and invest little by little.

Risks aside, the trade also has its advantages. Most binary option trading platforms available are clear-cut and easy to understand. Some platforms, however, are more intuitive than others. Keep this in mind when choosing between options. If the broker offers demo software, give it a shot. See if the program interface works for you.

Additionally, consider a broker's payout percentage. It might take some effort, but finding one that offers maximum payout will be beneficial. Remember that the average rate is seventy to seventy-five percent for successful investments, but there are some that offer ninety percent of the initial investment. For unsuccessful trades, look for brokers offering five percent at the very least.

Bring in Extra Earnings by Investing in Binary Options Trading

Binary options trading is among the newer money-making opportunities on the net. The amount of websites providing this service has gone up in number. If you are considering investing your dollars in the trade, you have to first learn as much as you possibly can about this.

History of the Trade

Most people believe that binary options was discovered just recently. You can imagine that this is the case because the concept has only been formalized in the last few decades. On the contrary, it has actually been around for a thousand years. For the purposes of this discussion, however, we'll discuss the modern practice which has its beginnings in the 1970s.

In 1973, the Chicago Board of Exchange (CBOE) and the Options Clearing Corporation (OCC) formalized the practice. Both of these organizations offered a regulated platform for options trading. The way options are traded today are based on the paramenters established by the CBOE and OCC.

What is Binary Options Trading?

Binary options trading is a business enterprise where investors predict the outcome of a certain asset within a certain period of time. It is called "binary" seeing as there are just two possible outcomes to the trade: either the price goes up or down. Traders speculate whether an asset will increase or decreases value instead of acquiring the specific asset. If a trader is correct, he or she will make a percentage of the initial investment. Depending on the options broker, an incorrect guess will lead to retaining a small amount of the initial investment, or none at all.

It's wise to figure out if the trade is conducted in European or American style just before going into the practice. Although the terms appear to be region specific, they're not confined to a specific market. The American style of trade is much more likely to pay out than its counterpart.

What are the risks and advantages?

Like every other business enterprise, this manner of trade has its advantages and disadvantages. Investors must be mindful of the risks they take when entering this business. Make sure to trade only the money that you can afford. The market fluctuates so understand that even though the chances are small, you may lose everything. Don't invest money you don't have or capital that is reserved for other interests like retirement or a child's education. Be wise about this.

Though there are risks to the trade, there's also several positive aspects. An advantage of the trade is simplified practice. Normally, trades are done in three mouse clicks. Fast results is an additional advantage of this investment option. Depending on your contract, you could determine your earnings within hours or days. There are risks, yes; but if you work with the right options broker, trading could be easy and intuitive. The services of the best broker will even ensure that you never lose your entire investment. That is why it is essential that you work with the best one.

Binary Option Trading is Like Predictable Roulette

I read a story a while back where a man decided to sell all of his assets including his house, car, and other investments to gamble on one spin of roulette. Roulette is a casino game where you can bet on red or black and if the ball lands on your color, you double your money. It is close to a 50/50 gamble with slight odds to the house as there are a few chances for the ball to land on green. This man liquidated all of his assets and placed a $130,000 bet on red...and it landed on red. He cashed out and walked away 100% richer. Binary option trading is much the same, but with an advantage to the gambler or in this case investor.

Binary trading options, also referred to as "all or nothing options", is just like playing roulette, but now you may be able to predict with great confidence the outcome before placing your bet. Instead of the Roulette's red or black, you are betting on if a stock or currency's value will go up or down. I guess you could still call that red (loss) and black (gain).

For example, if you purchased a binary trading call option on ABC Inc., all you need to do to practically double your money is to see ABC's stock price go up, even if it's only a cent. If you wagered $100 that the stock price would go up, you will have profited almost 100%, but if you had purchased that same stock and the price went up a cent, you would only have profited 0.0001%. You can also purchase binary trading put options where you wager that the value of a security will go down. In our example, the same bet can be made and if the price of the stock drops by even a cent, you again make your near 100% profit.

There are also binary option trades that payout a fixed amount, if the value of a security reaches a certain threshold. So if an ABC Inc's binary call option was purchased with a strike price of $75 and that stock reaches $75 before a set deadline then you are paid out a cash bonus. These cash or nothing options could payout $1000 or much higher than 100% of your investment. It's just a riskier bet than black (up) or red (down).

It's obvious that there is a lot of money to be made in a short time investing in this fashion. Call it legal roulette, but with better odds. Imagine if you would have kept betting that British Petroleum's stock prices would keep going down during the spring and summer of 2010. Due to the Gulf Oil crisis, you would be rich. Doing some research on the companies or currencies you are purchasing call or put binary options on can give you the edge you need to wager in the right direction. You don't have that with the randomness of roulette.

If you like fast returns on investments, I'd suggest giving binary trading options a try. I know that the free online trading platform EZTrader has an interesting interface where you can watch the values of your picks in real time, sort of like a horse race...it's ahead, it's behind...it's exciting. They also give a cash bonus in your account depending on your deposit amount and have tons of research tools, financial news feeds, and even mitigate your losses to some extent. You can't really go wrong here.

Binary Option Trade With Call and Put - Hedge Risk While Retaining High Return Potential

A carefully executed binary option trade with a call and put can substantially mitigate the risks associated with these high flying, fast paced contracts, and traders stand to benefit from this strategy in this rapidly expanding market.

Like most hedging related strategies, a well placed binary option trade with call and put positions can have a dramatic impact on the risk reward profile of your net holding. Consider buying the up side of the contract and making a $200 contract with a strike price at $10 per share. Let's say we are early in the hour (binaries expire hourly or at the end of the day depending on the terms) and your trade is decently in the money. Maybe the stock has gone up to $10.75 or $11.00 a share. Do you really want to hold that position for the remainder of the hour knowing all too well the market can turn with just the wrong set of news or sudden investor apathy? What can you do to lock in at least some of your gains in a supposedly "all or nothing" contract?

The answer is either a full or partial hedge making a binary option trade with a call and put - dollar and expiration matched. Fully matching your call and put positions will minimize your risk, while partially hedging (leaving some part of the trade open) can give the trader some added weight to one side if he or she thinks that side of the trade is fairly sure. It is not too complicated to understand this sort of hedging strategy but sometimes concrete numbers can help.

Binary Options Trading - A Quick Overview for Curious Individuals

When people think of binary option trading, many will probably assume it is related to computers. In truth, this method may have little relevance to the machine since this is a trade medium for people who want quick and convenient profit. If you find yourself interested, here are key pointers you should know.

What is a binary option trading?

This trading medium is one that yields a specific earning. Compared with regular option trade, asset or commodity bought and its corresponding market price do not affect revenues made from binary option trading.

When observed closely, this platform is more of a placed "wager" on a particular commodity, stock, or market. In this setup, a potential investor will be predicting whether a certain investment will end up with a higher value or a lower one at a specified period. An individual who believes value will go up trades under what is called as a "call option." A person who believes in the opposite will trade under a "put option."

What advantages does it present?

Its benefits include ease and fixed income yield. Unlike regular trading, a person who engages in this alternative does not have to be aware of market movements. Stock, commodity, or market breakthroughs and plunges will not have any effect on it. You do not need to pay attention to stock news and updates each time.

Furthermore, a person who wishes to engage in it may come in and trade at almost any given time since contracts can go for as short as one hour. Theoretically, you can ask for a put or call option at 12 o'clock and be getting due profit at 1 o'clock if the movement works to your favor. If you are a patient person, you can also find contracts that run for longer periods. Variations in contract length assure everyone who is interested will have the opportunity to trade.

Set income is another factor that makes it attractive. In a regular trade setup, prices can fluctuate and skyrocket during certain events such as wars, political unrest, and so on. You never know when you will be losing money. If you buy a certain commodity at a high price today, there is no clear guarantee that this will have the same price the next day or the week after that. If the market moves unfavorably, what you bought might then have a lower price. In a binary trade, you know exactly the possible income you gain at the end of each contract period.

Is an options broker necessary?

Yes, an options broker is essential in any trade platform. The company you work with can provide you with information about how trading systems run and how several factors might affect it. They can also give you valuable tips and pointers to remember so you engage as an informed client.

Binary option trading may sound easy at face value; however, this is still something you should be looking at closely. Reading more articles about it and reviewing its possible results are some steps you should do on your own. This way you know the inner workings and the risks involved when you invest your money.

Binary Options Trading Basics

Those who are not afraid to gamble should look into binary options trading. It is a fast-paced, high-risk trading option that potentially gives substantial returns. The return of investment you get depends solely on your ability to predict market movements at a specific point in time.

Understanding Binary Options

The concept of binary options is simple. Options brokers offer you a variety of assets, and you find a specific asset you want to buy. You will then purchase a contract, which last as short as a few minutes to as long as a whole day. You must predict the market movement and determine whether your assets will rise in value or not. You will receive the amount indicated in your contract if you make the right prediction. On the other hand, you will lose around 85-100% of your investment if you make the wrong one.

You can only choose from two predictions, as the name suggests. Your prediction may be "in-the-money" or "out-of-the-money". Your prediction is "in-the-money" if your asset reaches a higher value at the time of your contract's expiration. It is "out-of-the-money" if your asset's value falls by the time your contract reaches maturity.

There are two types of binary options trading. Cash-or-nothing binary option will give you a fixed price, usually ranging from 150-185%, if your asset reaches the strike price. Asset-or-nothing option, meanwhile, pays you the entire value of your asset if you make the right prediction.

What are the risks of binary options trading?

People also call binary options an "all or nothing option." The main risk is losing all your investment if you make the wrong call. Some contracts allow you to get back anywhere between 5-15% of your investment, which is still a big loss. You must be adept at studying and predicting short-term market fluctuations before participating in such a trade.

There is another binary options solution for you to try. You can resell your assets to another trader. Some traders buy assets for a higher price before the contract expires. Reselling your assets at a markup guarantees a return of investment. It also removes the risk of losing your money in case your contract ends out-of-the-money.

Where can you find options brokers?

Doing a quick search online gives you a list of brokers offering this kind of trading. Make sure you inspect each service provider closely. Read reviews and ask your friends and family about online brokers they recommend.

Go over their policies before signing up for an online trading account. You'll want to look at their terms and conditions. Inspect the fees they implement on payouts as well. Some brokers do not pay in cash. What they do instead is offer lower prices when you buy your next asset. Make sure to clarify these details with your broker of choice.

Check the solutions each brokerage offers as well. Many options brokerages offer a range of trading tools on their websites. This could be useful if you want to engage in other trades. Finally, make sure the asset price movement chart on your brokerage's website matches that of real-time stock charts. Reliable brokers provide accurate information, but it will still be safe to double-check.

A Beginner's Guide to Binary Options Trading

Binary options is a simple and user-friendly financial instrument that allow traders to make huge profits within short periods of time. The basic concepts of digital options trading are covered in this article.

This form of trading allows the trader to invest in a large variety of assets, such as currencies, stocks and commodities. Like the name suggests, the trader has two options in this form of trading. He can choose a call option or a put option.

The call option refers to a predicted increase in the price of the asset from the strike time to the expiry time. The time of buying the asset is the strike time. Expiry of the assets may be within a day or an hour. Thus, this option refers to an appreciation in the value of the asset. Conversely, the put option refers to a predicted decrease or depreciation in the price of the asset within a particular window of time.

Traders who trade in binary options have to consider three important decisions in order to attain success and profits.

They should choose their asset wisely. Digital options allow traders a variety of assets to trade in. They should choose assets for which they can find stock information through websites like CNN Money or Yahoo Finance. Beginners should ideally look at popular assets, as they are easier to predict. However, none of these can guarantee success. Traders have to take calculated risks in this form of trading as well.

Traders are required to choose from an hourly or a daily expiration time for each asset. This is important as volatile assets are likely to change value very fast. They are difficult to predict and traders should take care when choosing an expiration time for these assets.

Traders should also manage their money and choose the investment amount carefully. Binary options gives up to 75% profit in case the asset ends in-the-money, which is more than foreign exchange offers. However, there is always risk involved in trading.

New traders should start with smaller investment amounts to gain confidence and avoid large losses. As they gain experience, they can increase their investments and their profits. The keyword in binary options trading is information. Well informed traders can predict asset directions more successfully than ill-informed traders. Mainly, traders should gain respite in the fact that they do not need to predict the rate or amount of change.

Options Trading System - Binary Option Trading Simplifies and Shortens Outcomes

The binary options trading system is designed to both simplify the investment outcomes and shorten the investment time horizon. How it achieves this is by fixing both elements rather than permitting open ended results. Consider the standard options trading system - how while it does offer a fixed expiration of the contracts, it does not fix the payout outcomes. There is great potential for gain or loss over time for the standard option holder. Likewise for the writer of a standard contract - while the maximum profit for a trade is fixed, the loss is variable (and in the case of call writing the loss can be infinite).

Some traders would prefer a more simple options trading system, and that is where a binary options trading system can fill that void. Binary trades involve only the most highly liquid securities such as the Nasdaq index, Google common stock, US Dollar/Yen exchange rates, and the like. Trades are executed with a set strike price and only carry value based on the direction of movement of the underlying stock, not the size of that movement. What does this mean? Let's look at an example trade:

A $200, 75% payout 12:00pm expiration binary call option on Google with strike price $307.50/share will pay $350.00 if Google goes up as of 12:00pm, $30.00 if Google goes down. It does not matter if the underlying share price goes up 10 cents or 10 dollars, the payout is the same. Likewise if share price falls one dollar or one cent, the payout will be $30.00.

All You Wanted to Know About Binary Options Trading

When the payout is fixed to the underlying stock and it exceeds the threshold or the strike price, it is called binary options trading. In academic terms, there are two forms of this trading, essentially, the asset-or-nothing or the cash-or-nothing. All-or-nothing option is also called as the binary option, and is used in forex markets. It is called Fixed Return Options or FRO in the American Stock Exchange. The binary options are typical of the European styled options.

Buyers are usually given the trading agreement and are directly bought in the market. This type of trading is an unusual market tool as there are no liquid dealings for issuance and the termination. Since, the year 2008, the market has been presented with this basic version. Other platforms have emerged this year since January and it was expected that there would be 30 newly equipped platforms and other 70 of the underlying assets.

You cannot mistake the usual trading with binary options trading, as they are very different from each other. In the regular trading market, you are generally in the possession of the assets and hold it until the time of trading. However, in the case of the options trading market, you continue to trade based on the inconsistency of the underlying asset. You will be able to profit as a trader if you are able to accurately identify the price movement of the securities in the prevailing market conditions.

Traders who have an eye for details will be able to profit greatly from these options as they are flexible. Apart from the maneuvering of the security, the trader will be able to make decisions on the direction of the asset and the type of asset until its termination. The unknowns or the uncontrollable aspects of the trade include the movement of the asset to go beyond or lesser than the existing price or the strike price. In the case of an expected or predicted increase in the price, the buyer or proprietor of the option can take a call option based on the value of the security. This can be done based on the time frame that is normally at the end of the day, month or week. A put option is exercised when there is a fall of the strike price.

Most traders have been very profitable and successful with binary options trading due to its effectiveness as a tool.