Introduction to Binary Options

[Soultrader 12]

What are Binary Options?

"In finance, a binary option is a type of option where the payoff is either some fixed amount of some asset or nothing at all. The two main types of binary options are the cash-or-nothing binary option and the asset-or-nothing binary option. The cash-or-nothing binary option pays some fixed amount of cash if the option expires in-the-money while the asset-or-nothing pays the value of the underlying security. Thus, the options are binary in nature because there are only two possible outcomes. They are also called all-or-nothing options, digital options (more common in forex/interest rate markets), and Fixed Return Options (FROs) (on the American Stock Exchange).

 

For example, a purchase is made of a binary cash-or-nothing call option on XYZ Corp's stock struck at $100 with a binary payoff of $1000. Then, if at the future maturity date, the stock is trading at or above $100, $1000 is received. If its stock is trading below $100, nothing is received."

 

Definition taken from Wikipedia.

 

Resources:

 

CBOE Binary Options Introduction Page

[PeterFM 10]

I appreciate you starting this thread. Although this type of trading opportunity has been around for a while I suspect it isn't in common usage yet.

 

The importance to Uk-based traders, compared to CFDs for example, is that there are no tax implications for us.

 

I'm hoping to start discussions on the merits, or otherwise, of various tactics to take advantage of BOs.

 

In the UK there is one main broker for these as far as I can see. As I am not sure of the posting rules I won't post a link but they have a US brokerage as well. I've attached an image of the range of markets they offer. This won't interest any of the senior members here as they are basically a retail broker. For my purposes they are adequate.

 

At present I have based my BO trading using the techniques that I developed over 3+ years of spot FX trading ie Support/Resistance, price action patterns etc. From what I've read so far in the few days since joining this forum I still have a lot to learn.

 

If I can find some insights into the less risky strategies that can be applied to BOs and add to my knowledge of markets overall I will feel myself fortunate.

 

I look forward to any information that you guys would like to impart.

 

Thanks

 

Peter

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[JBWTrader 10]

Hey Peter

I have seen you over at Forexfactory a lot over the last three years. Welcome aboard mate as your contributions there have always been very helpful and respectful.

All the Best

John

[PeterFM 10]

Hey Peter

I have seen you over at Forexfactory a lot over the last three years. Welcome aboard mate as your contributions there have always been very helpful and respectful.

All the Best

John

Hi John

Thanks for the welcome but looking around I'm feeling slightly out of my depth here. It's a bit different giving basic advice to less experienced newbies to trying to understand the mechanics of Market Profile trading and/or the Wyckoff stuff.

 

I knew I had a lot to learn but it's like starting all over again .

 

Pete

[JBWTrader 10]

Yes I understand that completely...in fact I would say thats the best attitude one can have towards more open learning...

You will be surprised how quick you will pick it up...the people on here are very helpful and respectful towards those that want to learn...as you were on Forexfactory...

 

All the Best Peter and good luck

John

[Gregory 10]

So guys, where do you recommend trading binary options then? I've seen a couple of sites but prefer anyone with experience to give their tuppence worth.

[cuttshot 11]

Peter,

 

I know your post was a long time ago but I have been looking into binary options here of late and would be interested in any additional details of your trading. From the little research that I have done they have me skeptical. It just seems so much like throwing your bet down on the table and hoping for the best. Atleast when I put a traditional options position on an equity I have the option of adjusting my position. Not quite sure how I feel about the all or nothing aspect of binaries.

 

Don't mean to sound negative here as I don't have a full understanding of these products yet. Any insight would be great.

[diarist 10]

It has been two years since this thread has seen any action. Does it really deserve to be a sticky thread? Keeping it a sticky means only one genuinely active thread in the options section is viewed on the home page rather than two. Wouldn't it be better to show active threads rather than long-dead sticky threads?

[razahaza151 10]

So guys, where do you recommend trading binary options then? I've seen a couple of sites but prefer anyone with experience to give their tuppence worth.

 

Yes...Optionmint and Banc De Binary... Both solid. Optionmint pays faster. Probably one of the better sites ive traded on