Binary option betting is so termed because there are just two possible outcomes until the expiry period is reached. It is either the bet settling higher or goes lower depending on the estimation of the direction of market movements. If the movement of the asset price closes at a higher price, the bet is most likely to be settled at hundred. In case it closes at a lower note, the bet is probably to be settled at zero. Hence with binary options betting, the trader knows his potential loss or profit and thus allows him to lock his profit or limit his losses before the expiry of the bet. To be more precise, the trader can sell the bet at the existing market price before the bet expires in order to get huge gains and minimize losses.
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With only two possible results- win or loss, binary option betting works on a very simple principle. A trader simply has to make estimation on the direction of market movement. If he believes that the market will increase, he will buy the option bet and if he believes the market will decline in the future, he will sell. Actually the trader is not really buying or selling the underlying instrument, he is merely betting on the price of the market movement as to whether it will move up or down. If the trade closes in the favor of the trader, the bet settles at 100 but if it closes down, the bet settles at 0. The trader can go short or long on any price quoted. The money deposited for the binary bets is an amount equivalent to the trader’s maximum loss on that bet. Since the bet is already paid, there is no running margin.
One of the best ways to make money in one hour is binary options betting. Its all or nothing aspect makes it the most exciting online financial game, while the predetermined loss or fixed return enables the traders to be mechanically protected from high losses.
Binary option bets are always quoted on a scale of 0 to 100. It is based on the likelihood of an event occurring or not occurring. The trader can profit by placing a binary bet if he believes that a commodity, index or a stock is likely to move up or down in a particular period of time. It pays with a fixed amount which is normally 80% or nothing. The stock up by only $.01 will give the trader same amount of money as the stock moved up by $10.
Here is an example of an event occurring, such as the FTSE 100 finishes up at the end of the trading session. Till midday the FTSE is trading around 5250, having opened at 5215 in the morning. In this situation the trader places a bet that the FTSE 100 will finish higher on the day and quotes 79-81. This means that the trader is quoting an 80% possibility that the event will occur. The reverse of this, the trader quoting a 20% possibility that the event will not occur. If FTSE 100 indeed closes higher at the end of the trading session, the trader buys the bet. This is the basic principle behind binary options betting trading.