Finance is one of the fields where major innovations happen quickly due to the maturity and perfection of the markets. Within these, in recent years new products and mechanisms have emerged, allowing investors to operate and earn money quickly as a result of high volatility.
Binary options are an investment system that bets on the rise or fall in the price of underlying assets that are quoted in a stock market during a given period of time. There are two types of systems:
- cash or nothing – the amount is earned if, at the expiration of the option, it quotes above the amount paid (in-the-money) or nothing in the opposite case (out-the-money).
- active or nothing – in which the value of the underlying asset price can be earned.
The main characteristic of these products is that the investor has to try to predict if the price of a financial asset will rise or fall during a specific period of time. Subsequently, there are only two options, win or lose everything – hence the name “binary”. However, profitability can reach 50%, 70%, and even 80%.
Naturally, it is a high-risk mechanism due to its volatility and the amounts at stake and where operations last for a very short time – sometimes up to a couple of minutes – emulating a bidding system, and where speed in management plays a fundamental role with respect to other agents.
In the same way, it is also important to choose a good trading and operations platform, which has the quality and legal status to conveniently carry out the operations:
- Legal aspect – In all countries, there are official regulators that license and homologate operators. It is a matter of vital importance.
- Return history – It is essential to take into account the profitability and financial history of the platform when choosing one to manage your money; such as the trading platform – Anyoption, 24option, Iqoption or the Anglo-Saxon Binary Bank.
- Diversification – It is convenient to leave your money on those platforms that have several products such as currencies, commodities, cryptocurrencies, stock indices, etc. to reduce the risk.
- Associated costs – If you do not want to carry out risky operations and lose everything in a single movement, it is important to have hedging operations, so that when you lose your bet (out of the money) you do not lose the entire amount. There are platforms that ensure at least one win or loss compensation. In some places, it is possible to reimburse 5% -10% -15% of the amount lost.
But really, what benefits does investment in binary options bring?
As we have already mentioned, the good part of this type of product is the ease of operation. Through specialized platforms, you can access a multitude of operations on underlying asset prices, and also, in the case of winning, the returns are substantial.
It is also possible to know the profit/loss on the spot, since binary options are instantaneous, online operations. As we indicated earlier, they are very fast and usually happen in a matter of minutes. For example, since the binary options have a fixed maturity, this is usually from 30 seconds to 30 minutes, one hour before the market closes or even minutes before.
In addition, one of the binary trading advantages is the introduction of a simulator with which you can work without the need for real money operations. This is ideal for learning to master emotions, risk management and, above all, the dynamics of operations. You can gain knowledge with options trading course and start investments with reduced capital, mitigating the possible loss in the first operations.
However, as in all financial dynamics, not everything means an advantage. It is true that binary options represent a high-risk product due to its volatility, the duration of operations, where it is not possible to recover losses easily. Binary options do not work as a stock exchange or derivatives, but it is a dichotomous bet, it is “win or loss”. It is possible to learn to work with these products if you practice or have knowledge in analysis and forecasting. If not, you might need more time, but in any case, it is possible!