This section covers frequently asked questions related to Binary Options trading. Here you’ll find information about the various aspects of digital options trading like basic requirements, option types, investment amounts and withdrawals. Read on our Binary Options FAQs to learn more!
- What is Binary Options Trading?
- What is Underlying Asset?
- What is Call Option?
- What is Put Option?
- What is Amount of Investment?
- What Happens if I Finish in the Money?
- What is Time of Expiration?
- What happens if the Expiration Price is the same as The Purchase Price?
- What Do the Red and Green Colors Indicate?
- What is the Maximum Amount I Can Invest?
- What is the Minimum Amount I Can Invest?
- Can I View My Transaction History?
- Do I Need to Deposit Money in Order to Register?
- How Do I Make a Deposit?
- What is a SWIFT code?
- What Currencies Can I Use in My Deposits?
- How Can I Withdraw Funds
- Do My Payouts Get Taxed?
- Do I Need Special Software to Trade?
What is Binary Options Trading?
Binary options trading is an exotic type of trading which involves speculative predictions of the price of assets like currencies, stocks and indices. Based on the financial forecast whether an asset’s price will rise or fall, investors can finish a trade “in the money” or “out of the money”. Depending on the outcome, you can receive a payout in the range from 75% to 85% on top of your initial investment.
What is Underlying Asset?
An asset, or as some call it an underlying asset, is a financial term which describes an available trading item. Assets typically include Stocks, Currencies, Commodities and Indices. Assets are one of the key components of binary options trading. Without them you’ll essentially have nothing to trade with.
What is Call Option?
Traders buy Call options when they believe that an asset’s price will be higher at the end of a trade than it was at its beginning. The most attractive characteristic of call options is their cost-effectiveness. Technically speaking, owning a call option is always cheaper than owning the stock itself. This explains why most traders prefer to invest in call options rather than in stocks, when they predict an increase in a stock’s price.
What is Put Option?
Put options are the complete opposite of call options. They take the position that an asset’s price will be lower at the end of a trade than it was at its beginning. Traders typically choose put options when they find a downward curve in an asset’s price. Since stock markets don’t change trends too quickly, this is usually a sign to bet on puts.
What is Amount of Investment?
This is another essential binary options FAQ. Amount of investment, is the money your final payout is based on. This is the initial deposit you make, when you buy binary options contracts. Based on the outcome of your trades you can either increase your investment with 75% to 85% or lose it, in case your prediction ends out of the money. Usually, when trading through brokers, you’ll need to meet certain investment criteria. You won’t be able to trade below or above specific amounts per contract. However, this is hardly an issue since most brokers offer investments in the range from $5 to $10,000.
What Happens if I Finish in the Money?
The term “in the money” refers to the situation in which your prediction is correct at the end of a trade. You’ve successfully made a call or put. When your contract expires in the money, you’ll receive a profit between 75% and 85% on top of your initial investment. In total this translates to earnings of 175-185%.
What is Time of Expiration?
The time of expiration is the time and date at which your contract expires. This is an important aspect of digital trading and a key binary options FAQ. The time of expiration is one of the main factors that determine whether you’ll be in our out of the money.
What happens if the Expiration Price is the same as The Purchase Price?
The expiration price is what really matters when trading digital options. Even the slightest swing in it may put you in or out of the money. For example, if you’ve chosen to call for a trade and the price of the contract at expiry is just one point above the initial one, you’ll win. The opposite is also true. If you’ve bought a put option for a contract and its expiry price has fallen at the end of the trade, you’ll be in the money.
What Do the Red and Green Colors Indicate?
These two colors are typically used for visual representation of how an asset is performing on the markets. Green indicates that the asset is higher that it was at purchase. This is something you’ll want to see if you’ve selected a call option. Red represents that an asset’s price is lower than it was at the beginning of the contract. Red is a good sign for put traders.
What is the Maximum Amount I Can Invest?
The maximum investment amount depends on your broker. In most cases, this is between $5,000 and $10,000 per trade. For example, one of the key brokers in the field, OptionBit, offer maximum trades at $7,500. However, if you want to invest more money, you can always purchase multiple contracts at maximum investment. Binary options allow for an unlimited number of contracts for the same asset and contract period at maximum price. This flexibility essentially enables you to invest as much money as you want in your trades.
What is the Minimum Amount I Can Invest?
The minimum investment depends again on your broker. Usually, the smallest amount you can trade varies between $5 and $10. The rules for minimal trades are identical with those of maximum trades. You can buy multiple contracts for the same asset and expiration time for $5 or $10.
Can I View My Transaction History?
The transaction history is another of the many binary options FAQ novice traders need to cover. Most reputable binary options brokers provide a convenient and easy-to-use trader interface through which you can view all your transaction history. Transaction data can be sorted by date, amount, type of trade and in many other ways.
Do I Need to Deposit Money in Order to Register?
Some binary options brokers offer demo accounts which you can use to “get a feel” of how their platforms and tools work without the need to invest real money. These account types come with a set amount of “virtual money” you can use to trade. Novice traders would find demo accounts beneficial since they’re a convenient and safe way to learn binary options trading without exposing themselves to financial risks.
How Do I Make a Deposit?
Most binary options trading providers offer a wide range of payment methods you can use to make deposits to your account. These usually include bank transfers and credit cards.
What is a SWIFT code?
SWIFT stands for Society for Worldwide Interbank Financial Telecommunications. This is a unique code that identifies your bank. You need a SWIFT to initiate bank transfers. Typically, SWIFT codes contain 11 digits. In case yours is shorter, you can simply add “XXX” at its end to ensure compliance with transaction formats. If you’re unsure what your credit card’s SWIFT is, just contact your bank. They’ll have this information readily available for you.
What Currencies Can I Use in My Deposits?
There’s a wide array of currencies you can use for deposits with brokers. These include USD, EUR< GBP, JPY, BRL, RUB and many others.
How Can I Withdraw Funds
Different brokers offer different withdrawal methods but in the general case, this can be done through a bank transfer or check. Withdrawal times vary but they usually fall in the range between 2 and 5 business days.
Do My Payouts Get Taxed?
Although the majority of brokers don’t tax your payouts, you may be eligible for taxes according to the legislation in your country as well as local and national regulations. Make sure to check these details with the local government.
Do I Need Special Software to Trade?
You don’t require any special software installed on your computer to trade binary options. Most brokers offer web-based trading platforms through which you can perform all trading related activities in an easy and efficient way. All you need is a stable Internet connection and the latest version of your favorite browser.
These’re some of the basic binary options FAQs, newbie traders need to get acquianted with. Stay tuned for more digital trading questions and answers!