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Binary Options facilitated by trading platforms

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In the world of finances, there’s a large variety of ways and assets that can be traded, and each has its own benefits and risks. Nowadays, many investors’ portfolios include mutual funds, stocks and bonds. But the variety of securities and assets you have at your disposal does not end there. Another type of security, called an option, presents a world of opportunity to sophisticated investors.

In particular, a very interesting investment path, called binary options (also called Digital Option as well in in forex/interest rate markets or and Fixed Return Options on the American Stock Exchange) is a type of option where the payoff is either some fixed amount of some asset or nothing at all. No guesswork involved. You either get a fixed return on your investment or nothing. This rather new investment path has become quite popular with the advent of electronic trading, since trading platforms simplify the process involved in this kind of investments.

Binary Options have been around for a while now but recently have been a hit among traders, especially those familiar with these new investment alternatives. The name “binary” refers to the fact that the 2 possible outcomes, related to finance mean up and down. The two main types of binary options are known as cash-or-nothing binary option and the asset-or-nothing binary option. The cash-or-nothing binary option pays some fixed amount of cash if the option expires in-the-money while the asset-or-nothing pays the value of the underlying security. Thus, the options are binary in nature because there are only two possible outcomes.

For instance, let’s say you invest on a binary cash-or-nothing call option on a given stock at $100 with a binary payoff of $1000. Then, if when the option expires, the stock is trading at or above $100, you get $1000. If its stock is trading below $100, you get nothing.

Obviously, if you want to invest in binary options, you will need to first assess what options you are investing, so that you maximize your chances of getting a (often very large) profit. Or better, have professional brokers do it for you. They can make a huge difference in the risks you take (knowingly or by investing based on a simple hunch or comments overhead on TV) and, by extension, the profits you make from your investment.

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