One of the most popular trends in investments is found in the world of Binary options. And it is that the concept behind this type of operations makes it very easy to invest them, although of course, the risk is also present.
That is why we have prepared this guide for you, here we will tell you everything you need to know about binary options. Thus, you will be able to know all the benefits it offers, as well as the points to take into account when investing, as well as the strategies you must follow to do so.
▶ What are binary options?
While many of us could classify binary options as a type of asset, in reality this is not the case. Binary options are not assets Nor are they an investment instrument such as currencies or stocks.
Rather we can define binary options as a mechanism, strategy or investment style. This is because binary options They are the way to go to invest our money . The difference is in the way they work which can make us confuse them with assets or instruments.
▶ How do they work?
The mechanism behind this way of investing is very simple and It is based on two scenarios, whether or not you get the prediction right . This is because binary options work under a speculation assumption where you will have to guess the future price of the asset.
There are basically two results, that is why the binary concept, that the price of the asset rises or falls, that is, that it is higher or lower than the nominal value at the time of launching the order after the set time has elapsed. In addition to having two results, you have two scenarios, you hit or miss the estimate.
▶ Concepts you should know
It is important to know a few words behind binary options. For example, the term Call refers to placing an order in which the price of the asset will be higher while the term Put refers to the price being lower.
Purchase time refers to the time it takes to make the purchase while the expiration time is the period for the asset to reach its final value (how long it takes to complete the order). These are words that you should keep in mind, since their use is very common.
▶ Operation example:
Suppose you place an order Call when the price of an asset is higher in 30 seconds (Expiration time) and you hit it, then you will have won 100% of the value of the order, that is, if it was 10 you won 10 more. The same applies if the order is Put (lower the value) and you hit them.
On the other hand, if you place a Put order and instead of lowering the value, it rises and the price rises, you will have lost the total of your order. If you put 10, then you will lose all 10.
▶ Types of options
Binary options are very broad, although the most basic are the Call and Put binary options , these have been evolving with new variants. Here we will tell you what are the main characteristics of the most common types of binary options.
- European: In these options, the binary options are settled only when the expiration time expires, they are never settled before. This only occurs if the condition agreed in the operation is met. European binary options , along with the basics, are the most common in the markets .
- American: On the other hand, American binary options have the main characteristic that they do allow their settlement anticipated. That is, you can liquidate the operation or order before its expiration time, which has its advantages. Of course, the agreed conditions must be met.
- One Touch / Touch: This type of binary options works like the basic options, Call and Put. The main difference is that here the investor determines the exact amount of the future price , either up or down. Here we do not have an expiration period because as soon as the asset reaches the fixed value the order is fulfilled.
- Range, Tunel or Rangebet: We can say that this type of binary option is a mix between the European and the One Touch. Here the investor sets both a minimum and a maximum range and if the operation ends in that range, the investor will make a profit.
- 60 seconds: Basically these types of binary options are a kind of Call and Put, only the experience time frame is much shorter. Here the operations are carried out in a period of 60 seconds . This is an increasingly common type of binary options.
- Double One Touch: Within the American type we find the double One Touch binary options which operate similar to the simple One Touch. The main difference is that double limits are set here, that is, two up or two down limits, instead of just one.
- No Touch: Unlike the previous options where your option must reach the fixed limit, here the operation is in reverse . That is, you set a limit and if the operation reaches it in the set period of time, then you lose your investment.
▶ Advantages of investing in financial options
Investing in binary options has many advantages, one of the most prominent is the agility and speed with which these investments are made. You can make good investments without the need to use large amounts of money as there are options for small budgets.
The profitability is huge, since there are binary options that offer more than 80% profit on average, yes, the risk of losses is also very high. The commissions are usually low and these types of platforms are very common. In addition, you can perform binary operations from your mobile, computer or tablet.
Financial analyst and economist with a master's degree in finance.