Binary Options Trading

Discussion in 'Stock Market Education' started by kgord, Jan 23, 2016.

  1. kgord

    kgord Senior Investor

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    Does anyone here do it? Is it advisable? There are many platforms and options for this. It seems like it might be a good way to make some cash. What would the advantages to this be over regular stock market investing? Would this be preferable over Forex? What is the difference between the two? Maybe some of you experienced investors could answer this question.
     
  2. JR Ewing

    JR Ewing Super Moderator Staff Member

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    I prefer ordinary options that allow for the possibility of a theoretically unlimited payout if I'm right and if the price of an underlying security I have a long option position on goes "to the moon", so to speak.

    If you don't have a whole lot of money to play with, I'd just stick to more traditional investing - particularly if you also don't have a whole lot of experience as an active investor.

    I sometimes like to buy calls and puts on some more volatile investments because they are a good way to speculate that the price will either move up or down beyond a certain amount within a certain timeframe without having to tie up very much capital like I would in actually buying the stock. And buying a put rather than an actual short stock position in such a scenario is less risky, since I've only put down a few bucks on the RIGHT but not the OBLIGATION to short the stock, and I don't have to worry about being blown out if such a bearish position goes against me if the stock goes to the moon...

    http://www.businessinsider.com/joe-campbell-gofundme-page-for-e-trade-2015-11

    I've found that buying options is best limited to more volatile investments, and that occasionally selling (writing) options is best limited to less volatile investments that I'm already "covered" on - i.e., writing a covered call on a stock that I already bought at a cheaper price than what it is now, so that if the stock does shoot up beyond what I would expect during a certain time period (which I will tend to think to be more unlikely than likely when selling an option rather than buying an option in this scenario), I will still make at least a few bucks off having to deliver the stock to the person I sold the call to - because I already own it at a lower cost basis.

    If you don't know what you're doing with options, or don't have the time or aptitude for them, you can possibly get hurt selling them, or you can likely whittle your money down to nothing by being wrong too often when buying them.
     
    Last edited: Jan 23, 2016
  3. JR Ewing

    JR Ewing Super Moderator Staff Member

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    Buying put options as insurance against long stock positions can be an effective tool - again more likely to work well with more volatile holdings that sell off for one reason or another - bad earnings, industry slumps, failed drug trials or drug approval attempts, etc.
     
  4. kgord

    kgord Senior Investor

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    Thanks JR Ewing. Binary Options just seems popular right now, and it must be popular for a reason. I think that many people must be making money otherwise why would it be so popular? It could be something good, but it sounds like it is really not the thing for novices to get involved in. I will stick to the tried and true.
     
  5. manoharb

    manoharb Senior Investor

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    ADX(14) is important for Binary options, when trend is strong, Trading in Binary options is risk free. maybe you earn less profit, but, it can't make your loss in strong trend. if ADX is weak, prefer profit booking or start buying or selling according to trend. but, there are some technical facts, I use Daily ADX, weekly ADX, Monthly ADX and Quarterly ADX compare them with each other. find long term trend and after that, I create my Short-term positions. Only using Daily ADX is not useful. at which point book profit, for that, you can use Pivot support-resistance, camarilla or moving averages.
    My analysis got more easier after i started learning how to use and compare 30-50-150-200SMA lines. PCR is also useful in for binary trading, you can buy puts and calls when PCR is in 0.97-1.03,0.63-0.70 etc. range. In this PCR range, i never took loss. ADX is very important for binary trading.
    ( most important: For binary trading appropriate gap in puts and calls is important, In DJIA, NIKKEI, DAX,NIFTY 100-200Points gap recommended, In CAC, FTSE100, NASDAQ, Shanghai composite 50-100 points gap recommended )
     
  6. anders

    anders Well-Known Member

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    Binary Trading Options come in many different forms - "one touch", "range", and "high-low", to name just a few. They are more of a gamble than they are an investment - like JR says, you can't capitalize on a swing in the price with binaries. Your return is fixed, as also is your loss. But you know your risk profile and your reward profile as an exact figure with binaries, which some people prefer.

    I flirted with using a binary option last year to hedge a position I took on a certain stock, but things happened very quickly and in the end I didn't need to. They are quite good for this - hedging - but for anything else, I'd probably avoid.
     
  7. kgord

    kgord Senior Investor

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    OK Thank you for the concise explanation Anders. They seem to be very popular in certain sectors. There seem to be hundreds of binary platforms that are available. I was just curious as to why they were so popular and why people were using them. It seems like the vast majority of them are located overseas, probably to get around US banking regulations. Thanks JR and Manoharp too.
     
  8. Benoit W

    Benoit W Well-Known Member

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    Nоt rеаlly.
    Thеоrеtiсаlly yоu соuld mаkе mоnеy bеtting оn shоrt tеrm miсrо-struсturе, аnd if it wаs pоssiblе dо tо this, thеn I'd hаvе а gо. Hоwеvеr, whаt pеоplе tеll mе is thаt if yоu аrе аny gооd аt trаding binаry оptiоns, yоur brоkеr will сlоsе yоur ассоunt.

    Sinсе I wаs а quаnt аt а big bаnk, оnе thing I lооkеd intо wаs tо sее hоw I соuld mаkе mоnеy оff binаriеs. Thе wаy thаt I'd gо аbоut it is tо gеt а tоn оf dаtа оn hоw thе mаrkеts bеhаvеd in thе pаst, gеt а tоn оf dаtа оn whаt binаriеs trаdе fоr, аnd thеn sее if thеrе is аny mispriсing thаt I саn mаkе mоnеy оff оf.
    Funny thing, nо оnе sееmеd tо bе intеrеstеd in giving this sоrt оf dаtа.
     
  9. remnant

    remnant Well-Known Member

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    Binary options are a simple way to trade price fluctuations in multiple global markets. They have different payout risks, liquidity structure and investment process. Most binaries trade on a high-low option on either side of the strike price. If a trader wagers on the correct side of the strike price after a movement, he makes a profit. The converse is true. Binary options trade on willing buyer willing seller basis.
     
  10. kirtimeliwal

    kirtimeliwal Senior Investor

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    Binary option trading is little more complex than ordinary shares, in this a trader makes a bet on the future price of a particular stocks. Either he wins or loses depending on the results. It's just like gambling where a person take a chance to see his luck.
    Many financial expert provide trading recommendations on binary option trading, if a trader want, he can also refer those tips to get extra return. As binary trading is complex it needs more expertise and market knowledge to manage loss and gains.
     

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