If you read about trading on the internet you will sooner or later come across the term “binary options”. Especially inexperienced traders tend to be attracted by these binary option advertisements and open an account only to find out after a little while that it does not work out as well for them as advertised. The current (at 11 am CET) exchange rate for the EUR versus the USD is 1.3655 and you can buy the option for EUR 30. The attractive part of these options is the seemingly “low” investment of EUR 30 in that case and the comparatively “high” payout of EUR 100.
If you take a closer look at these instruments you will soon find out (after a few trades) that they are tailored in the favor of your counterparty – in this case the broker offering these options.
If you do not have a tested profitable strategy for binary options it is certainly better to stay away from them as they are constructed in favor of the company offering them.


Binary options are also known as “all or nothing” (100 or 0) options – options with a pre-defined payout structure. The spreads are huge and the prize of the option does not move 1:1 with the underlying instrument. Yet these advertisements for binary options are tailored for beginners – no professional trader would get attracted by these catchy “earn 80% in one hour” adverts on Google. Binary options are in this way exotic options and have not much in common with the so called “plain vanilla” options. If the exchange rate is below that level you lose your investment, as the value of the acquired option is 0 EUR. In this case your profit is EUR 20 if the price remains below the 1.3680 barrier and the option expires at 0 EUR.


If you are wrong and prices are above 1.3680 at 3 pm CET your loss is EUR 80 as the option you sold at 20 is now worth EUR 100.
You’ll learn as you play trading in a structured, rule-based environment with professional analysis to teach you to trade as if you’re on the trading floor of one of those large financial institutions, with limiting leverages and overnight exposures.



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Comments

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    20.04.2014

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    20.04.2014

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    20.04.2014