So what is Binary Stock Option? A stock option is a contract between the buyer and the seller that provides the buyer or the seller the right but not the obligation to buy or sell the underlying asset at a certain determined time at an agreed price. The market price of the underlying asset is immune to changes during this predetermined time however the price of the contracted underlying asset remains the same for the buyer or the seller.
Trading binary options on the stock market is very different from the traditional trade in the stock market. Many note that the binary options market is active supplement and often become more popular element than the other, long-standing stock market trading tools.
Stock options are purchased by traders for speculation that is buying with an anticipation of change in price of the stock within that stipulated period. When a stock option is purchased, the buyer can employ a call option or a put option. However with binary stock options the trader need not buy or sell the stock at the expiration but just has to guess the direction of the price movement within a certain period of time with a strike price at place.
At the expiration
At the expiration of the contractual period the binary stock option can only have two possible outcomes- one where the guess of the trader come true that results in the contract expiring in money which means that the trader gets the sum of money agreed upon at the time of entering the contract or the guess of the trader proves wrong and the contract expires out of money resulting in the trader losing the money invested in the option.
It is important to note that in contrast to the standard options trading, binary options trading in the stock market is different to additional risk when placing trading bets. However it is important to note that when trading binary options, you’ll never lose more than the principal of your investment. As is the case with other binary options, you receive income from each transaction. All you need to do – is to decide in which direction to change the price of the asset to which you decide to make a bid. Ordinary income is 65% to 81%, depending on the type of broker you choose and the type of the asset. Profit for the period affect the time frame for the option contract expires. This means that you can get a quick profit by trading binary options on the stock market.
This explains the fact that many experienced traders and beginners, interested trade on the stock market, prefer to invest it in the options, and successfully receive this huge profit.
Now that we know what is binary stock option, it’s important to understand that trading stock options involves a risk because a wrong guess means losing the capital invested in the option.
But at the same time the rewards of binary stock option can be very high. If the contract ends in money, the trader can gain up to 70% of the investment in a very short period of time.
These days, binary stock options are being offered by almost all the big platforms in the market that too without charging commissions on the transactions made by the traders. These platforms are also offering countless stock options for the traders to choose from. Before starting binary stock options it is necessary for people to understand certain terminology involved in the trade like expiration date, strike price, call option, put option etc as acquaintance with these terminologies will restrict trader losses to the minimum.
Again, binary stock option trading is a very risky affair and it is advisable to formulate a strategy to trade before putting actual money into the trade. A good strategy to trade binary stock options would be to research thoroughly about the stock or stocks for which you plan to buy an option. Secondly invest only a small portion of the total invest-able capital that you hold in one trade so that if the guess goes wrong, only a small portion of the capital is lost.