Understanding the Parameters of a Trade

It is easy to trade binary options once you understand the parameters of the trade. Every binary option is based on three distinct components:

What is an asset in binary options?

The first component of a trade, is the asset. Depending on which binary option broker you choose, you’ll have a range of assets from different financial markets, like stocks, commodities, currency pairs and indices, that you can trade binary options on. Some traders choose to specialize in one asset, or one market, while others trade a collection of options simultaneously.

The Binary Option Contract and Expiration

The next component to trading is the binary option contract. Most binary option brokers offer contracts that expire in one month, one week, one day, or one hour, but on OptionBit’s trading platform you can also trade options as short as 15 minutes or buy an option just five minutes before it expires. It’s important that you know just how much time there is before the option expires so that you can make an accurate prediction.

The Forecast or Prediction

Your job as a trader is to determine which direction the price of an asset will move before or at the time of expiration. If you believe that the price of underlying asset will increase, then you should choose the Call (Above) option. If you think that the price of the underlying asset is going down you should choose the Put (Below) option. If you are correct in predicting which direction the price of an underlying asset will move, you’ll receive a high return on your investment. For example an in-the-money payout for a binary option traded on the Optionbit platform is paid between 75 - 81% -- nearly doubling the original investment.