How to Trade Binary Options

HOW TO TRADE BINARY OPTIONS

Introductory video explaining what are Binary Options and how they are traded. Duration: 12 mins.

Binary Options strategy video: Trading the U.S. nonfarm payrolls release. Recorded in real time. Duration: 15 mins.

Binary Options strategy video: Trading on a price break out pattern. Recorded in real time. Duration: 17 mins.

Introductory online video tutorial on charting technical analysis. Ideal for short-term trading. Duration: one hour.

Personalized access codes to the Binary Options trading platform where you can watch live prices on a tick-by-tick basis.

Binary Options in-house research papers on the mathematics of pricing and trading plus several trading guides.

Plus, you'll find out how to receive one-on-one educational support
and special financial bonuses.

WHAT ARE BINARY OPTIONS?

A binary option, also referred to as a digital option, has only two possible outcomes each of which pays out a fixed return depending upon whether a certain condition is fulfilled by the time the option expires. For example, a binary option that has percent payout of 75/10 means that, with an initial investment of U.S.$100, the customer will receive $175 if the condition is met (and the option expires in-the-money) and $10 if the condition is not met (and the option expires out-of-the-money). In the latter case, the net cost to the customer is $90.

Binary options are a novel type of investment vehicle that are rapidly becoming a favorite among beginning investors because they have limited risk and are simple to understand. Binary options typically expire in an hour, giving you the opportunity to earn a high return over a very short time period.

WHY TRADE BINARY OPTIONS?

Binary option trading has several unique advantages. The payout and risk of a binary option are known in advance and are fixed. The full payout is received even if prices settle just a little in the trader's favor. When trading binary options, there is no margin required and no risk of losing more than the amount initially invested. Binary options cash settle at expiration so there is no need to manually close a position. Finally, a customer can invest in a binary option for as little as U.S.$50 allowing the beginner to trade with the thrill of actual money while risking very little.

HOW ARE BINARY OPTIONS TRADED?

Retail binary options are traded live on an online (web-based) electronic platform. Prices and charts are displayed in real time allowing the trader to see the price action on a tick-by-tick basis. Purchasing a binary call or put option is done with the simple click of a mouse. The trading platform displays a settlement price at the option's expiration and income (if any) from expiring options is deposited automatically into the trader's account.

When trading binary options, you should make sure that the platform is registered and regulated. To our knowledge, TradeSmarter has the only regulated platform on the market. You will receive personalized access codes to this platform when you request our proprietary Binary Options Trading Starter's Pack.

ABOVE/BELOW BINARY OPTIONS
Max Return: Up to 85%

The most popular type is the above/below or high/low binary option and trading is fairly straight forward:

If you feel that prices will rise, then invest in a binary call option.

If you feel that prices will fall, then invest in a binary put option.

If you choose correctly, then you'll receive back your initial investment plus a return of as much as 85% of the investment, depending upon the market being traded. If not, then the most that you will lose is your initial investment. Better still, in some cases a small part of your initial investment in a losing trade may even be returned to you. For example, say that you invest $100 in a above/below binary call option on Google with payout of 75/10. The price of Google at the time you buy the option is $544.67 per share. When this binary call option expires, if the price of Google is above this price, then you'll receive $175. If below, then you'll receive $10, meaning that the net loss will be $90.

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What are Binary Options? Binary options are just like regular options except:

They last only one hour. Designed for short-term trading.

Fixed payout if the option finishes in the money or not.

Option need only finish one tick in the money to earn the payout.

You can invest as little as $50.

Cash settle automatically at expiration.

It's quick and easy to start trading.

No commissions. No margin required.

Trade and watch prices tick by on a regulated platform.

WHY IS TRADING BINARY OPTIONS SIMPLER?

A trading system for a typical asset needs to address three elements: when to get into a trade, either long or short; how much to risk on the trade; and when to close the trade, either at a profit or at a loss. Determining each is a challenge and all three elements must be correctly balanced to achieve profitable trading performance.

Binary options, though, require a less complicated system. With a binary option purchase, the most that you can lose is the investment amount and this can be as low as $50 so the risk is automatically controlled. Binary options expire within an hour and cannot be sold prior to expiration so there is no decision to make over closing the position. The trading system of a binary option reduces to the single decision of deciding when to get into a trade, either long (by buying a call option) or short (by buying a put option). You'll find tips and insights in our proprietary Binary Options Trading Starter's Pack.

BINARY OPTION MARKETS AVAILABLE

Currencies:
EUR/USD, USD/JPY, GBP/USD, USD/CHF, GBP/JPY, AUD/USD, EUR/GBP, EUR/JPY

Commodities:
Crude Oil, Gold and, during the U.S. trading day, Natural Gas, Copper and Silver. All are based on the nearby futures contract traded on CME Group.

Stocks and Indices:
During the Asian trading day: BHP Billiton, Commonwealth Bank, CSL, Macquarie Group, Newcrest Mining, Rio Tinto and the S&P/ASX 200 index.

During the European trading day: Barclays, BP, RBS, HSBC, Lloyds, Tesco, Total, Sanofi-Aventis, BNP Paribas, AXA and the FTSE 100 and CAC 40 indices.

During the U.S. trading day: Mastercard, Macy's, General Electric, VM Ware, SPDR Gold Trust, Goldman Sachs Group, MGM Resorts, China Mobile, China Life, China Petroleum and the S&P 500® and NASDAQ indices.

Forex Binary Options Binary options provide a simpler and relatively less risky way to trade forex. And since the forex market is the most liquid market in the world, there is active price action essentially around the clock. At right is an example of above/below one-hour binary options on the EUR/USD foreign currency exchange rate as they would appear on an online trading platform. The options have a 81/0 payout*. They were available starting at 6:00 a.m. (ET) and can be bought at any time up to ten minutes prior to expiration at 7:00 a.m., after which time new options will be available for trading over the subsequent hour. The blue line shows the price history of the EUR/USD exchange rate over the life of the options thus far. The EUR/USD current price is 1.40885. If the investor anticipates that, at option expiration, the EUR/USD exchange rate will be above the current price (the light green shaded area on the chart), then the investor will click on the green CALL button to invest in the binary call option that locks in the current price. After so doing, the customer need only wait for the option to expire. If the binary call option expiration price is above the customer's locked-in price, then the binary call option will return the maximum payout, in this case, the initial investment plus 81%. If not, then all of the initial investment will be lost. If, on the other hand, the investor anticipates that, at option expiration, the EUR/USD exchange rate will be below the current price, then the investor will click on the orange PUT button to invest in the binary put option that locks in the current price. After so doing, the customer need only wait for the option to expire. If the binary put option expiration price is below the customer's locked-in price, then the binary put option will return the maximum payout, in this case, the initial investment plus 81%. If not, then all of the initial investment will be lost.
GOLD Binary Options Gold continues to dominate the investment headlines around the world. With gold binary options, you can trade short-term movements in the price of this precious metal while risking as little as U.S. $50. At right is an example of above/below one-hour binary options on gold as they would appear on an online trading platform. The price is not the spot price of gold but the price of the nearby futures contract. Thus, with a binary option, you have the same exposure as trading the futures but without having to pay the futures margin requirement. The options have a 71/5 payout*. They were available starting at 3:00 p.m. (ET) and can be bought at any time up to ten minutes prior to expiration at 4:00 p.m. The blue line shows the price history of gold over the life of the options thus far. The current gold price is $1515.703. If the investor anticipates that, at option expiration, gold will be above the current price (the light green shaded area on the chart), then the investor will click on the green CALL button to invest in the binary call option that locks in the current price. After so doing, the customer need only wait for the option to expire. If the binary call option expiration price is above the customer's locked-in price, then the binary call option will return the maximum payout, in this case, the initial investment plus 71%. If not, then the customer will receive 5% of the initial investment meaning that 95% of the initial investment is lost. If, on the other hand, the investor anticipates that, at option expiration, gold will be below the current price, then the investor will click on the orange PUT button to invest in the binary put option that locks in the current price. After so doing, the customer need only wait for the option to expire. If the binary put option expiration price is below the customer's locked-in price, then the binary put option will return the maximum payout, in this case, the initial investment plus 71%. If not, then the customer will receive 5% of the initial investment meaning that 95% of the initial investment is lost.
CRUDE OIL Binary Options Crude oil is a very actively traded market, even among day traders. Binary options on crude oil provide a relatively low-risk way to trade short-term movements in this exciting market. At right is an example of above/below one-hour binary options on crude oil as they would appear on an online trading platform. The price is not the spot price of crude oil but the price of the nearby futures contract. Thus, with a binary option, you have the same exposure as trading the futures but without having to pay the futures margin requirement. The options have a 85/0 payout*. They were available starting at 3:00 p.m. (ET) and can be bought at any time up to ten minutes prior to expiration at 4:00 p.m. The blue line shows the price history of crude oil over the life of the options thus far. The current crude oil price is $97.473. If the investor anticipates that, at option expiration, crude oil will be above the current price (the light green shaded area on the chart), then the investor will click on the green CALL button to invest in the binary call option that locks in the current price. After so doing, the customer need only wait for the option to expire. If the binary call option expiration price is above the customer's locked-in price, then the binary call option will return the maximum payout, in this case, the initial investment plus 85%. If not, then all of the initial investment will be lost. If, on the other hand, the investor anticipates that, at option expiration, crude oil will be below the current price, then the investor will click on the orange PUT button to invest in the binary put option that locks in the current price. After so doing, the customer need only wait for the option to expire. If the binary put option expiration price is below the customer's locked-in price, then the binary put option will return the maximum payout, in this case, the initial investment plus 85%. If not, then all of the initial investment will be lost.
S&P 500® Index Binary Options The S&P 500® index represents the benchmark for large-capitalization U.S. stocks and the U.S. equity market in general. Trading the Index has traditionally been available only with a futures contract but now, binary options provide a new and less risky way to trade this important Index. At right is an example of above/below one-hour binary options on the S&P 500 index as they would appear on an online trading platform. The options have a 85/0 payout*. They were available starting at 11:00 a.m. (ET) and can be bought at any time up to ten minutes prior to expiration at noon, after which time new options will be available for trading over the subsequent hour. The blue line shows the price history of the S&P 500 index over the life of the options thus far. The current value of the S&P 500 index is 1319.144. If the investor anticipates that, at option expiration, the S&P 500 index will be above the current value (the light green shaded area on the chart), then the investor will click on the green CALL button to invest in the binary call option that locks in the current value. After so doing, the customer need only wait for the option to expire. If the binary call option expiration price is above the customer's locked-in price, then the binary call option will return the maximum payout, in this case, the initial investment plus 85%. If not, then all of the initial investment will be lost. If, on the other hand, the investor anticipates that, at option expiration, the S&P 500 index will be below the current value, then the investor will click on the orange PUT button to invest in the binary put option that locks in the current value. After so doing, the customer need only wait for the option to expire. If the binary put option expiration price is below the customer's locked-in price, then the binary put option will return the maximum payout, in this case, the initial investment plus 85%. If not, then all of the initial investment will be lost.

* Payout may be higher or lower depending upon the instrument being traded. As well, the maximum payout may decrease as a binary option approaches the end of trading.

The following are trademarks of The McGraw-Hill Companies: S&P®, S&P 500®.

Binary options trading or digital options trading involves risk of loss and is not appropriate for everyone. Only risk capital should be used. Over-the-counter binary options trading or digital options trading may be prohibited in some jurisdictions. Customers should inquire with their local financial regulators for more information. The binary options trading strategies shown above are for informational purposes only. No representation is being made of the gain or loss that can be achieved from following the trading strategies. Investing in binary options, like all investing, entails risk of loss. You should therefore only invest with risk capital meaning money that you can afford to lose. Binary options trading is not appropriate for everyone.

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Abstract: Learn how to trade binary options with this free Starter's Pack that includes binary options trading strategy videos and more.

HOW TO TRADE BINARY OPTIONS

Forex Binary Options

GOLD Binary Options

CRUDE OIL Binary Options

S&P 500® Index Binary Options