Advantages of Forex Trading with Binary Option

Binary options or binary options are an alternative way to play the rforex period. While this is a relatively expensive way to forex trading compared to the leveraged forex trading offered by a number of brokers, the fact that the potential maximum loss is limited and previously known is a major advantage of the option. However, the first one, what is the picker? Binary OPsi can be used to speculate on the results of various situations, for example, will the jobless claims this week be higher than the market forecast, or will the EUR or JPY fall against the USD today? Say gold is trading at USD 1,195 per troy ounce now and you are confident will trade above USD 1,200 that day. Assume you can buy binary options in gold trading at or above USD 1,200 at the close of the day, and this option is trading at USD 57 (bid) / USD 60 (offer). You buy the option at USD 60. If gold closes at or above USD 1,200, as you expect, your payment will be USD 100, which means that your gross profit (before commission) is USD 40 or 66.7%. On the other hand, if gold closes below USD 1,200, you will lose your USD 60 investment, with a 100% loss.

For binary option buyers, option cost is the price of the traded option. For sellers of binary options, the cost is the difference between 100 and the option price and 100. From the buyer's point of view, the price of a binary option can be considered the probability that the trade will succeed. Therefore, the higher the price of binary options, the greater the perceived probability of asset prices rising above the strike. From the seller's side, the probability is 100 minus the option price. All binary option contracts are fully guaranteed, meaning that both parties of a certain contract - buyer and seller - must set up capital for their trading side. So if a contract is traded on 35, the buyer pays USD 35, and the seller pays USD 65 (USD 100 - USD 35). This is a maximum risk of buyers and sellers, and equals to USD 100 in all cases.

Thus reward-risk profiles for buyers and sellers in this example can be expressed as follows:

Buyers - Maximum risk = USD 35

Maximum Reward = USD 65 (USD 100 - USD 35)

Seller - Maximum risk = USD 65

Maximum Reward = USD 35 (USD 100 - USD 65)

Binary options on forex are available from exchanges such as Nadex, which offers them to the most popular pairings such as USD / CAD, EUR / USD and USD / JPY, as well as a number of other widely traded currency pairs. This option is offered with expirations ranging from intraday to daily and weekly. The size of the spot forex spot checks from Nadex is 1, and the check value is USD 1. The binary forex options offered by Nadex will expire every hour, while the daily ends at a certain time of day. The weekly binary option will end at 3 pm on Friday.

Example: The EUR / USD currency pair to show how the binary options can be used for forex trading. For example, you use the weekly option which ends at 3 pm on Friday, or four days from now. Assume the current rate is EUR 1 = USD 1.2440. Consider the following two scenarios: (a) You believe the EUR may not weaken on Friday, and should stay above 1.2425. The binary options EUR / USD> 1.2425 are quoted at 49.00 / 55.00. You buy 10 contracts for a total of USD 550 (excluding commissions). At 3 pm on Friday, the EUR traded at USD 1.2450. Your binary selection is in position 100, giving you a payment of USD 1,000. Your gross profit (before taking a commission) is USD 450, or about 82%. However, if EUR has closed below 1.2425, you will lose all of your USD 550 investment, with a 100% loss.

(b) You are bearish in EUR and believe it can go down on Friday, say to USD 1.2375. Binary options EUR / USD> 1.2375 quoted at 60.00 / 66.00. Since you are bearish on EUR, you will sell this option. Your initial fee for selling any binary option contract is USD 40 (USD 100 - USD 60). Assume you sell 10 contracts, and receive a total of USD 400. At 3 pm on Friday, let's say EUR is trading at 1.2400. Because EUR closes above the strike price of USD 1.2375 on expiration date, you will lose USD 400 or 100% of your investment. What if the EUR has closed below 1.2375, as you might expect? In this case, the contract will reach USD 100, and you will receive a total of USD 1,000 for your 10 contracts, for a profit of USD 600 or 150%.