Options trading tends to confuse lots of people, particularly people that are new to trading and investing. While there are complex formulations involved in options trading, almost most of this stuff takes place behind the scenes and also the man doing the trading doesn’t really need to know some of it. The theory is that, options are extremely simple: they are essentially a bet that, because of a certain time in the long term, the price of a stock will probably be below or above a given price (called the strike price).
So people try to profit from buying and selling olymp trade solutions in the exact same way they make an effort to make money from buying and selling stock, using different strategies based on whether they think price will move up or down in the future.
Some of those complicated formulations come into play when pricing options. The purchase price of an option will change continuously since the price of the underlying stock fluctuations, and there’s also some thing called “time premium” built into the price of an alternative. This basically means is the more an option has before expiration, the more extra price is inserted into its price. When you think about it this is reasonable, as an option by having an expiration date in to the future has additional hours available for that price of the underlying stock to move over the option’s strike price. To put it differently, an option expiring in 5 minutes only has five minutes staying to get price to move above its strike price (if it hasn’t already), but an alternative dying in 5 has a much greater probability of that happening.
Binary options are a specific form of option that pay “all or nothing” depending on the purchase price of the underlying stock in expiration.
There are a Couple of reasons why a dealer Might Wish to consider binary options, and these comprise:
Simplified profitability – in case the stock price is above the strike price, you receive money. If not, that you don’t. No crazy formulas to maintain track of.
Limited risk – every potential outcome is known beforehand, so there are no possible surprises where you can end up because people more income than you initially spent (some thing which happens from time to time with options trading, and something reason why folks tend to think “options can be dangerous”
Availability – since binary-options are becoming more popular, there are an increasing number of agents that are offering them for traders.