The popularity of options trading has increased due to many reasons in recent years and particularly the Internet makes an important contribution to this popularity. There are brokers and providers which have built their offers at a simple platform to trade options and this makes options trading interesting for everybody. Not only stock exchange brokers and banks can buy and sell options but also the smallest investors. Most of the time, options trading is very suitable for small investors – at least if its risks are well understood and its potential can be really totally used.
If you also want to start with trading options immediately, we recommend 24Option, which is one of the leading providers with a very easy to use operating system and which has the best support for traders.
Brokers for trading options
Choosing the right broker is important because of many reasons. On one hand, there are indeed brokers which are not reliable and which sometimes cause problems. It is of course necessary to steay away from such brokers. The good news is that it is very easy to identify these brokers and they become known by everyone very fast. Therefore, we can only suggest those brokers which are indeed recommendable for options trading. You can find a detailed overview of all the brokers here: Brokers for binary options.
A completely new form of options trading is binary options. These options are not only interesting for professional traders but also for a wide range of other traders. Therefore, they are the main subject of this website.
Binary options (also called digital options) are different to classical options in that there are fixed payouts. You can buy Put or Call options and you know already beforehand that you will obtain a return of 85 % or – 100 %. With a call option, you bet on the increase of the price until the expiration date, i.e. the option will be in the money and with a Put option you bet on a decreasing price. And it does not matter if the price stays just over the expiry rate or further above. With a Call option, you will benefit from an increase of the prices as well, the more the better. But, with binary options, the same does not hold. There, it is only important whether you are in the money or not. If you are in the money, you will get a payout, if not, the total investment is lost.
Trading with currencies, commodities, stocks, indices and more
As far as the underlying asset is concerned, there is no difference with binary options. Because, also in case of them, there are a lot of choices. Especially currencies are very popular as underlying assets, particularly because they can be traded 24 hours a day and normally the volatility is very high. So, it is possible to trade nonstop and receive many action possibilities so that it will never be boring. It is also possible to trade commodities, stocks and indices as underlying assets.
For whom is options trading interesting?
There are many different people and institutions that do not necessarily depend on options trading. On the other hand they would miss important advantages. Imagine you possess a stock asset which is invested strongly in DAX. Now, you see many possible dangers that can cause a worldwide crisis such as a global financial crisis. Even if VW or Siemens is not affected directly, such a crisis will cause all stocks to fall very strongly. This was experienced with the 2008/2009 financial crisis and also in 2011 with the Euro crisis. In such a case, the situation becomes always more and more uncomfortable and turbulent at the stock exchange so that a protection in all directions is very important. Through an option on DAX, you can protect your portfolio against such crash scenarios. You can even buy options which allow winnings although the DAX and therefore your portfolio suffer a 30% lose. Everything is possible and as far as you invest in stocks, keep commodities such as gold at home or keep your money in another currency, options can really create wonders.
Of course, options are also suitable simply to gamble. It does not mean that you can go to a casino immediately, but it means simply that you take a high risk. In the finance world, risk means that the returns can fluctuate significantly. In case of options, it means for example that you can buy options for 500 Euro, which can be valueless in half a year and expire, or on the contrary they can develop magnificently and bring in 1500 Euro. Everything is possible and the risk is in this case a fluctuation from 0 to 1500 euro.
What is so interesting about options? They can offer unlimited winning chances at a limited risk. You can buy an option for 1 Euro and you can have the chance of earning 20 Euro per option. If, on the other hand, the option develops in the wrong direction, it can become absolutely valueless, but you will only use 1 Euro. This is the main reason why also private investors can get a lot with options.
Hint: There are lots of good resources about Binary Options trading but the following ones are our favourites. First of all we can recommend the Wikipedia article where you can find a more scientific approach of Binary Options. And this is a great article at Forbes about gambling with Binary Options. And last but not least a very cool site with an even cooler design: Binaryoptionsgeek.net. There you can find lots of useful information, broker comparisons and more.