Unlike traditional Forex trading, how to trade options is simple and revolves around speculating on the direction of the expiry rate of an underlying asset at the end of a predetermined time frame. Forex trading payouts are progressive, in the sense that a trader’s winning or losing amount depends on the difference in pips (last decimal point of an asset’s market rate) from the strike level to the expiry level – the payouts are moreover never pre-determined. This differs from binary options payouts that are known to the trader before placing a trade, and which are solely based on the end result of a yes-or-no decision, hence the name given to binary options trading.
How to trade options is straightforward in nature and makes trading considerably easier due to the fact that traders have simpler decisions to make and already stand to know how much profit or loss they should expect before the execution of an option.
Binary Options trading has been present for quite a while but has experienced a global rise in popularity in 2007. This is due to several factors.
The OCC (Option Clearing Corporation) and SEC (Securities Exchange Commission) made it legal for binary options to be traded in major over-the-counter markets in a global scale, widening market regulation and liquidity. This changed Binary Options trading, following its rapid global expansion, from its previously complicated nature to being more approachable to novice traders who had little knowledge on how to trade options.
The global Binary Options boom wouldn’t have had as high an impact as it did, without the introduction of extremely advanced trading platforms and new emerging features. This came about with the founding of many new brokers who specialized in binary options trading and contributed to the industry’s growth by making binary options trading more attractive to newcomers.
This page will define and give examples of the different types of binary options trading that are offered by most traders, and how to trade each one of those option types.