Binary options is an OTC market meaning over the counter, this means that a the broker offers directly the assets to the trader without a third-party such as a bank. As binary options is global there is always a market to trade, across the Stock Exchanges of London, NY and Asia.
It’s a veritable 24/7 market which is one of the reasons it holds such appeal. With the advancement of online trading during the last few years, Binary options are available to be traded on any web trading platform provided by the binary options brokers. These web based platforms have all the necessary tools like prices and charts displayed in real time to help traders get a sense of the market.
Once the trader has decided on his investment strategy, the purchase of a “Call” or “Put” binary option can simply be done with just a click of the mouse. Furthermore as the trading platform is web-based, binary options traders can trade from any location around the world.
Compared to Vanilla options (normal options), binary options have a different risk/reward structures and different fees as well. Nevertheless, because they have just two possible outcomes, binary options are extremely simple and novice traders can easily get a grip on them and use them for investment purposes. The trader is only required to bet on the direction of the price fluctuations and the quantum of the fluctuations to win the wager.
For example, if the trader feels that the price of an asset will rise, he should put his money into a “Binary Call Option”. Alternatively, if the trader feels that the price of an asset is going to fall, he should then buy a “Binary Put Option”. The correct determination in some cases can yield returns as high as 85%.
But what is really attractive about binary options is the fact that they help investors to quantify their risks. Binary options cover a wide range of markets. There are binary options to allow traders to trade with bonds, Commodities, Bonds, Forex and indices. Some brokerages even offer binary options for traders to make money off economic news like interest rate decisions by the Federal Reserve or the European Central Bank (ECB).
Binary options being a Fixed Rate Option (FRO) have a predetermined fixed percentage of return unlike vanilla options. The potential gains of Vanilla options can be infinite but theoretically, their risk levels are much higher as well.