In order to trade the binaries you need a binary options contract with a broker. But what should you look for in exploring your broker?

What are Options?

An option contract is an agreement which gives the buyer the right, but not the commitment, to buy an option for a specific price on or before a certain date. An option, just like a stock or bond, is a security. It is also a obligatory agreement with strictly defined terms and properties.

The scheme behind the (binary) option is present in numerous day to day situations. Let’s say that you ran in to a house that you’d love to acquire. Unluckily, you won’t have the money to purchase it for another three months. You talk to the owner and settled a deal that gives you an option to buy the house in three months for a price of $200,000. The owner agrees, but for this option, you pay the value of $3,000.

Options contract fee

Making profit is awesome. Nonetheless, after making a trade it is not awesome if you have to pay a fee or commission for closing a trade. Traditional brokers often ask a fee for opening a trade and again for closing this trade and this usually starts with a minimum of $10 (or €). To end up in the money you need at least a profit of $21. Option contract prices with binary options are almost always free of charge. The option companies make a living on withdrawal fees or by offering extra services for which the customer has shell out. Brokers can make a very good income from their investors and should therefore not ask for options contract prices.

Options Contract Expiration

With binary options you can select from a wide assortment of options contract expiration frames, in contrast to traditional options. Most used expiration frames are:

• 60 seconds
• 5 minutes
• 15 minutes
• 1 hour
• 1 day

It is also very likely to choose an expiration time of one month, but since binary options trading is more about the short term trades this is not used frequently, but offered to who would like to avail it.

An options contract is not an agreement just like the one for cellular providers, but a contract in which you pay a certain amount of money expecting an options rate going up or down and to have the broker pay you out when you have predicted the rate correctly. Meaning that each time you place a new binary options contract is the same as ‘signing’ a new contract.

What are Barrier Options?

Barrier options are a monetary option whose growth value depends on whether or not arriving at a prearranged level – the barrier – of the underlying asset. If this level is hit, the option can be active (so-called “knock-in option”) or the option right expires (so-called “knockout option”).

The benefit of barrier options over standard options is that the price of the option is lower than in standard conditions by the options. The barrier options are among the fundamental building blocks of exotic options. Other exotic options are often composed of several barrier options.

In addition, the well-known click funds are created in this way. Normal barrier options rely on achieving certain price levels at some point in the term of the option. There are also two major classifications of this.

Options Straddle

Straddle is an options trading term. A straddle indicates that the call and put options on the same stock, with the similar expiration date and strike price are concurrently bought or sold. We have a discussion about “going long” if a put and call (straddle) is purchased, while selling the combination (which one does not own) is called “short”.

One can purchase a straddle if one anticipates a movement of the value of the underlying stock, whilst it is not known whether this will be up or down. If the stock goes up, they exercise the call option, if the stock goes down, it exercises the put option; in both cases at a profit. The only threat you take is that the purchased straddle expires insignificant if the expected movement is not provided or is very small.

You sell a straddle (go short) to take advantage of a declining value (cost of the straddle). The value of the straddle decreases as the expiration date approaches. The premium is partly determined by the expected value. One can also buy or sell a straddle of a stock market index or the price of a bond.

Stock Option Contracts

Before you settle on which broker you would like to sign up with, check their site to find out what tools they are using. Determine if these tools are sufficient for you or do you have to spend some money on additional software.

As a novice trader you have to develop a trading strategy for your own. It is not said that my strategy also works for you. The distinction is that the person you developed the strategy knows it from the inside out and can blindly use the strategy.

In order to start trading binary options with an options contract, a deposit of no more than $1000 is good enough to find out how it works and what trading strategy you would need to gain some profits.

Always bear in mind that whatever you want to trade with, don’t be afraid to lose the money. When you start trading stocks, the first trade will almost always be lost. A friendly reminder: only invest the amount of money you could afford to miss trading binary options contract.