binary options Archives - How to Trade Options

Is Binary Options a Scam? Read This and Decide

Is binary options a scam or not? That is the question. Now for the answer. What I’m about to tell you is my honest assessment of the value of binary options trading. But first, for those who don’t know, let’s define exactly what binary options are. Once we’ve done that, we will then assess their worth in comparison with traditional options trading (sometimes called “vanilla options”). We will do this based on a “return on risk” principle.

Finally, we’ll draw some conclusions based on our observations and in the light of other ways of risking capital for a return.

What are Binary Options?

Binary options have three main elements:-

1. You need to predict a future outcome to be realized within a specified time period – anywhere from 1 minute up to more than a week away.

2. During the period before expiration, no adjustments can be made, nor can the options be sold early for a profit or stop loss. Profits or losses can only be realized at the time of expiration. They are also absolute and final.

3. If the outcome is realized, you receive a profit on what you risked – usually about 70 percent. If the outcome is NOT realized, you lose most of, if not all, your invested capital on that trade.

In summary, the reason why they are called “Binary Options” is because the results can only be a win or a lose. This is final and absolute. There is nothing in between. Hence the term “binary” (meaning “twofold”).

Binary options can be traded over a range of commodities, indices and currencies. Currency pairs (forex) seems to be the most popular, as they trade 24 hours, 5 days per week and are very liquid.

Is Binary Options a Scam?

The answer to this question is really one of perception. If you’re one of those people who can consistently pick winning outcomes and can do with for an overall profit, or have a proven binary options trading system that does this, then I’m sure you will be waving the flag for binaries.

But let’s run a few numbers. We’ll assume a generous profit of 75 percent for wins and 100 percent loss for losing trades.We’ll also start with $1,000 capital and each trade will risk $100.

On a given day, you place 5 trades on anticipated outcomes for currency pairs within a 5 minute expiration period. Your first 3 trades are losing ones – you’re now down to $700 capital. Then your next 2 trades win and at 75{3a39a80e0257ac0455bc3b3978d4f68a2ed2cda6344ecf0a5f3dbf28ade020eb} profit, you make $75 on each. So you’re down $300 to begin with, then up $150 – an overall loss of $150.

Let’s say that you’re better at picking winners and you win 3 and lose 2 trades. You’ll be up by $225 ($75 x 3) to begin with and you’ll be very happy at your new account balance of $1225. Then you’ll lose the last 2 trades and be down $200. So your ending balance for the day is $1025 – a profit of just $25, for risking a total $500, in 5 x $100 trades.

If you’re really good and win 3 out of 4 trades (or 75{3a39a80e0257ac0455bc3b3978d4f68a2ed2cda6344ecf0a5f3dbf28ade020eb} win rate), you’ll make $225 on the wins and lose $100 … a net result of $125 profit.

How confident are you, that you can achieve an 75 percent success rate, bearing in mind that you can’t close out a position if it temporarily goes into profit – you have to wait until expiration for the result?

The service offered after clicking the image below, offers Binary Signals via text message and boasts 72.5{3a39a80e0257ac0455bc3b3978d4f68a2ed2cda6344ecf0a5f3dbf28ade020eb} accuracy. Combine this with the above strategy and enjoy the profits.

Looking at it Another Way

You could say that trading binary options where the profit is 70 percent and the loss 100 percent, is like betting on the favorite in a horse race, where the win dividend is $1.70. The only difference is, that in this “race” there are only two horses – one is called “Up” and the other “Down”.

If one horse in this “two horse race” was far superior to the other, then you would feel confident of a win. That would be like saying that the odds of the currency pair being above where it presently is, in five minutes time, is very high.

Is Binary Options a Scam if You Have a System?

is binary options a scam

Gold Options Trading

Three Ways To Do Gold Options Trading – and a Fourth Way if that Doesn’t Work for You

1. Options on Futures

Gold options trading is designed to take advantage of price movements in the global price of gold in such a way that limits risk and magnifies profits in proportion to the amount invested. Gold is a commodity and as such, attracts futures contracts that are often used by large corporations as a means of hedging against price fluctuations. These futures contracts are called “Gold Futures” and are traded on the major commodities exchanges around the world such as the Chicago Mercantile Exchange (CME) and New York Mercantile Exchange (NYMEX) in the US, with symbol GC (plus appropriate extension for each future).

Gold futures can be a great alternative to investing in gold bullion itself, or gold coins or company stocks involved in gold mining.

For traders however, futures contracts carry unlimited risk, meaning that if the price action goes against you, you can lose more than you risked for the trade – and since futures are leveraged financial instruments – a lot more!

This is where options come in.

Gold options trading involves taking out options contracts (symbol OG) on gold futures (GC) as the underlying financial instrument. Gold options are traded through a division of the NYMEX called COMEX whose main focus is options on precious metals. Each gold option contract covers one COMEX Gold futures contract and the strike prices are quoted in US Dollars and increments of ten cents per troy ounce of gold. If you are still holding the options at expiration date and they are in-the-money, the options will be exercised and the gold futures, each contracts covering 100 troy ounces of gold, will be delivered to you. These in turn will be subject to the normal risk vs reward associated with commodity futures.

Most of the more popular brokers, allow you to trade options on gold futures.

2. Gold Options Trading Using ETFs

If using options on futures seems too complicated for you, another way of trading on the price of gold is to use an Exchange Traded Fund (ETF) whose stock price is designed to reflect the performance of the price of gold bullion. The most popular one in the USA is the streetTRACKS Gold Shares ETF whose symbol is GLD. It ranks number 5 among the top 100 ETFs and open interest on its options are in the thousands, particularly for near month options.

Since this ETF trades at one-tenth of the price of gold, it means that if the current gold price is say, $1,550 per ounce, then the stock price will be $155 per share. Since the options are highly liquid and easily traded, you can either trade simple directional plays, or construct more advanced options positions. Gold price action can be quite volatile and breakouts from consolidation are common particular during economic uncertainty and therefore, ripe for option straddle plays.

3. Gold Option Trading With Binary Options

If you’re more inclined towards short term trading, or even day trading, you may wish to consider using binary options. These are a different style of option contract where you either receive a profit of about 70 percent if you’re right, or only 85 percent loss on your invested amount if you’re wrong. You name a strike price and expiration period and if the price of gold bullion is above or below that price (depending on whether you chose calls or puts) you either get paid a fixed amount or you don’t. In some cases, the expiration can be only hours away.

You can trade binary options on gold, along with a number of other instruments such as forex pairs, indices and other commodities with Anyoption binary options brokers.

4. Trading the Spot Gold Price Using a Forex Broker

Whilst trading the spot price of gold isn’t gold options trading, it is another way of doing it. You will find that most reputable forex brokers will also include the price of gold among their list of tradable securities. Although primarily focused on currency pairs (forex), gold in it’s relationship to the value of the US Dollar (XAU/USD) will also be included. If you’re residing in the United States this will be perfect for you, as there will be no other currency issues. Nevertheless, traders from all over the world can follow and profit from movements in the gold price by using a forex broker.

The great thing about forex is, that you experience the power of leverage. Your small investment (risk) will allow you to experience the effect of price movements of a much larger actual currency, or in this case, precious metal. But it works both ways – you can also lose just as much if the price action goes against you. If you want to trade gold this way, you need a good trading strategy which includes effective money management using appropriate position sizing and stops.

Anyoption Review

Welcome to our Anyoption review page. Anyoption is primarily binary options brokers and claim to have the leading binary options trading interface on the planet. If you’re not sure what binary options are, the short version is, that they are a way to bet on where a financial instrument will be in a nominated period of time. If you’re right and your options are in-the-money at expiration – you get paid a large amount, if your options are out-of-the-money, you still get some funds back but only a relatively small percentage of your investment. The whole idea behind the term “binary” is that there are only two outcomes – win or lose.

Anyoption Review – How Well do They Pay?

Anyoption claims to reward winning trades with as high as 71 percent profit and return about 15 percent of your risked capital to you for losing trades. This effectively means that if you were theoretically able to place a straddle trade (equal number of both call and put options over the same security) then one side will return about 70 percent profit while the other, an 85 percent loss. Unlike vanilla options (regular options) there is no possibility for unlimited profit potential. Trading binary options with Anyoption is an easy process, because your interface with them is entirely web-based and very user-friendly. There are no trading platforms to download. This means you can login to your account from your home or office computer and place a trade. Indeed, they like it to be known that some people make money with them during their lunchbreak.

Anyoption Review – What Can You Trade With Them?

The beauty of binary options is that they are available across a broad spectrum of underlying financial assets, including the major forex pairs which you can trade around the clock, stocks from the USA, UK and Asia, as well as indices and commodity futures. Anyoption also has a ‘weekend trading’ feature, which allows trades to be placed over the weekend in anticipation of whether the underlying asset will touch a nominated level when the market opens again. In consideration of the greater risk, the payouts are also greater – around 300 percent – and the options don’t need to expire in-the-money, only touch the nominated level.

Anyoption Review – Other Features

To open an account with Anyoption, you need a minimum $50 deposit, which is great if you don’t have much capital to risk. So if you have a spare few hundred dollars and want to try it out, they make it easy for you. They also have an impressive demo feature where you can try your hand at binary options trading and get a feel for how it works without risking any money. You also have the choice of rolling forward your option until the next available expiration time, as an alternative to realizing a losing trade.

Overall, if you’re into binary options trading and looking for a reputable, well-financed broker whose services are offered in many countries, Anyoption is one of the best we have found.