Those who are familiar with stock and share trading, can understand the binary options trading in a better way and for those who don’t know anything about stock or share trading, binary options trading is kind of a selling and buying of shares, capital or assets. The assets or shares that are traded in binary options trading are called underlying shares or assets. In binary options trading, the buyer has only two options; he can get big profit on the shares he bought after a specific time or he can end up with nothing. This trading has only two options and that is the reason it’s referred to as binary options trading.
People usually assume that binary options trading are kind of like share trading or stock broking where in reality, it’s completely different as compared to that. First of all, binary option trading has only two options. If you are trading shares or assets, you can get profit or end up with nothing. Secondly, unlike share trading, binary options trading offers huge amount of profit on shares. For example, if you buy a share worth $100, you can get more than $10,000 on each share with binary options trading. There are more to describe in binary options trading rather than just talking about the huge amount of profit that traders get.
When you buy these shares from someone or some company, you are legally bound to the contract that unless the option expires, you can’t sell these shares or assets to anyone. Each kind of binary options trading has different expiry dates. For example, there are options available with 15 minutes expiry date and you can also buy options that will expire in 6 months. It all depends on how much you can wait before getting the profit from your investment. On the other hand, if you don’t get any profit out of your investment in binary options trading, you end up with nothing at all.
It doesn’t matter if you have invested $100 or $100,000 in the shares, if you are lost; you have lost every single penny of your investment. There are some binary options traders that offer to return some of your invested amount in case you lose but that is very rare and most companies don’t offer that deal. Another important thing to remember in binary options trading is that when you buy stocks or assets, you can’t sell them to anyone until they expire. This is the key reason most people don’t invest in binary options that even when you know that your investment is going in loss, you can’t do anything about it and you have to wait until the expiry date arrives and then the market decides if you get any profit or lose everything.
Usually there is only one rule in binary options trading that makes it easier for people to understand. If you have bought a share worth $50 a share and the expiry date is in one month, if after one month the company’s shares are worth more than $50, you get to have the profit that you fixed with the company and if the worth is less than $50, you don’t get anything at all.