Binary options are classed as exotic options, yet binaries are extremely simple to use and understand functionally. The most common binary option is a "high-low" option. Providing access to stocks, indices, commodities and foreign exchange, a high-low binary option is also called a fixed-return option. This is because the option has an expiry date/time and also what is called a strike price. If a trader wagers correctly on the market's direction and the price at the time of expiry is on the correct side of the strike price, the trader is paid a fixed return regardless of how much the instrument moved. A trader who wagers incorrectly on the market's direction loses her/his investment.
If a trader believes the market is rising, she/he would purchase a "call." If the trader believes the market is falling, she/he would buy a "put." For a call to make money, the price must be above the strike price at the expiry time. For a put to make money, the price must be below the strike price at the expiry time. The strike price, expiry, payout and risk are all disclosed at the trade's outset. For most high-low binary options outside the U.S., the strike price is the current price or rate of the underlying financial product, such as the S&P 500 index, EUR/USD currency pair or a particular stock. Therefore, the trader is wagering whether the future price at expiry will be higher or lower than the current price.
High-Low Binary Option Example
Assume your analysis indicates that the S&P 500 is going to rally for the rest of the afternoon, although you're not sure by how much. You decide to buy a (binary) call option on the S&P 500 index. Suppose the index is currently at 1,800, so by buying a call option you're wagering the price at expiry will be above 1,800. Since binary options are available on all sorts of time frames - from minutes to months away - you choose an expiry time (or date) that aligns with your analysis. You choose an option with an 1,800 strike price that expires 30 minutes from now. The option pays you 70% if the S&P 500 is above 1,800 at expiry (30 minutes from now); if the S&P 500 is below 1,800 in 30 minutes, you'll lose your investment.
You can invest almost any amount, although this will vary from broker to broker. Often there is a minimum such as $10 and a maximum such as $10,000 (check with the broker for specific investment amounts).
Continuing with the example, you invest $100 in the call that expires in 30 minutes. The S&P 500 price at expiry determines whether you make or lose money. The price at expiry may be the last quoted price, or the (bid+ask)/2. Each broker specifies their own expiry price rules.
In this case, assume the last quote on the S&P 500 before expiry was 1,802. Therefore, you make a $70 profit (or 70% of $100) and maintain your original $100 investment. Had the price finished below 1,800, you would lose your $100 investment. If the price had expired exactly on the strike price, it is common for the trader to receive her/his money back with no profit or loss, although each broker may have different rules as it is an over-the-counter (OTC) market. The broker transfers profits and losses into and out of the trader's account automatically.
Choose A Binary Options Signals Service To Help You Get Started
On numerous occasions in the past, we have expressed our skepticism when it comes to trading signals services in general.
However, every once in a while there exist services that catch our attention and that we believe merit a mention so that all existing or aspiring binary options traders become aware of a particular service and be able to discern if it is suitable for them to use it or not.
One such service, which appears to be increasingly gaining in popularity amongst traders, is the Binary Options Trading Signals service or BOTS for short.
Binary Options Signals with Franco or BinaryOptionsTradingSignals.com
What differentiates this service from most others out there and what actually makes it unique is the fact that rather than receiving short instructions via email or SMS, the signals here come through your browser, during a live web session. Accessible both through a pc and a mobile phone, provided it carries the necessary technology, these daily sessions put every trader in a virtual trading room, looking over the shoulder of a real professional trader, as he places his bets and being able to mimic what he does.
Delivered via a high quality live stream, including full audio, this interactive session entails multiple signals pertaining on a wide range of expiry times and binary options tradable assets, across all the assets categories. Moreover, since it is interactive, it enables the subscribers to interact with the professional trader, Franco, in real time being able to pose all their questions and request his assistance in placing their bets or explaining any query and overcoming any difficulty they may have. Naturally, this means that the customer support service of this particular signals provider is unparalleled since it happens then and there on the spot.
Another unique and appealing feature of this particular signals service is the fact that it is also a learning experience for traders. Watching a professional on the act on a daily basis and being able to ask him what you want while he is at it, is much like a tailor-made training session for each trader, who in time learns to incorporate the various strategies he/she is witnessing unfold before their eyes and then in turn becomes able to adopt and implement them independently.
The final advantage we want to mention on this service is the consistently good performance it records in terms of payout, since the average trader claims an 85% payout per week. Calculated and benchmarked on a weekly rather than on a per trade basis, the success rate of this service is realistic and usually reliable, far from the exaggerations and unfounded claims of other signals service providers.
Having briefly elaborated on its merits let us know turn the light on the drawbacks of this particular service. In order to be able to implement the trade signals provided you have to be able to sit and watch the live streaming video. Since this is broadcast for two hours every day between 9:30 and 11:30 AM EST, you have to be available, irrespective of the time zone you are in, to be sitting in front of your pc or with your smartphone in hand and also have access to your trading account in order to be able to place trades at the same time as Franco does.
Therefore, if you are an occasional trader then this Binary Options Signals with Franco service is probably not suited for you as it only works if you can spare those two hours every day and dedicate them to placing your trades and learning the strategies being implemented.
Another downside is the fact that BOTS does not offer a free trial period and even setting up a demo account comes at a fee. Therefore, you cannot test it for free. If you want to use it you have to pay and put your faith in the service before witnessing its actual results for yourselves. Which conveniently leads us to the price of the service. We have left this towards the end, because we didnít want to immediately put you off. The truth of the matter is that BOTS is significantly more expensive when compared to other binary options trading signals providers, since the subscription fee for two weeks is as high as 97 USD.
However, we do not feel that the higher subscription rate should immediately put you off, since if you take a closer look this service has a higher value for money than its average rival. Provided you are serious about your trading and you have the time and money required to invest in BOTS, then it is almost certain that your investment will yield results and profits. Actually, the enhanced reliability of the signals given out and the innovative method through which they are delivered a very strong assets and they do offset the increased cost associated with the service, especially if you are careful to execute the proposed trades accurately and timely.
As always, choosing a signals service, if any, is a very personalized decision for each individual trader and not all services are equally suited for all traders. If BOTS looks like your cup of tea, then it is perhaps worth to try it out for a couple of months and judge for yourselves whether it is actually enhancing your trading experience and helping you become a more successful trader.