While binary options are relatively straightforward, trading binary options need not follow suit. Sure, it all comes down to yes or no predictions: will crude oil trade above 45 dollars a barrel tomorrow at noon or not? Will stocks of company X fall 10 points by 5 p. m. next Wednesday? Every yes and every no have their corresponding binary options (if they don’t things can and will be arranged), with their prices, conditions and profit margins. But how does binary options trading work? Let’s find out:
As previously stated, every single binary option poses a question for their prospective holders: will the price reach a certain point within a few hours (or days, weeks depending on the binary option), or not? If your answer is “Yes”, there is a binary option for you. If your answer is “No”, there is also a binary option for you. If the answer is “Maybe”, you can still buy binary options and get rid of them in case things go south, cutting your losses or maybe even turning a profit. Since binary options are priced according to their odds of success, buying cheap binary options and waiting for their price to rise is a valid strategy. The underlying price of binary options continues to follow the odds of success through the system of option bids and offers. Every now and again, people will make option bids to holders of binary options which are soon to expire in the money (or so they believe). Also, holders of binary options sometimes make offers to sell their binaries for various reasons: maybe they know something you don’t, or they just need the money… In any case, things are by no means finite, even when your binary options are out of the money.
Option bids and offers
When a really cheap binary option starts beating the odds, and is about to switch to an ITM binary option, people will make offers to take such binaries off your hands, so if you want to cut the suspense and cash out early, you can, but at somewhat lower prices than you might otherwise achieve. Since the payout is capped at 100 dollars per binary option, no one is ever going to pay you more than that. In fact, no one is ever going to come close to that number, because of fees, risks and the fact that the other traders are in this for the money, too. They want to make money just as much as you do. Then again, there is nothing stopping you from making binary option bids which are about to expire, if you think the money is easy.
There is money to be made in binary options as in the Forex markets as well, and not just by holding them until they expire. Some people actually specialize in buying and (re)selling binary options to third parties. The money may not be that easy, but it is there, and there is a lot of it, too.