Binary options are a great way to diversify your investment portfolio; here we’re going to take a look at a few of the best binary options brokers. Binary options are relatively new to the US market, but the number of quality brokers is growing all the time. Here we’ve chosen a few of the best, based on the quality of their platform and reliability of their service.
If you’re new to binary options we’ll also cover a few of the basics to get you started. Binary options are actually a pretty simple thing to get your head around, much simpler than trading traditional Forex or options.
What Are Binary Options?
A binary option (sometimes called a digital option) is a type of option where the payout is either a fixed value of the option or nothing at all, in other words you either win or lose.
There are two types of options, calls which mean you think the price will rise and puts which mean you think the price will fall.
Some people think of binary options like a form of gambling, if you’re right you win a fixed payoff and if you’re wrong you simply have to cover the price of the bet.
Let’s take a look a real example; you think that the closing price of EUR/USD will rise above its current price of 1.3926 in the two hours until closing. So you buy 10 call options for EUR/USD at or above 1.3926 for a fixed price of $40 each. The fixed payoff for these options is 80% and the refund value is 10%.
There are now only two possible outcomes to this trade, if you’re right and the price closes at 1.4023 then you win 80% of your original investment. $40 x 10 = $400 + 80% = $720, minus the cost of the trade which was $400 ($40 x 10). So your total profit would be $320.
If the price closes at 1.3875 then you lose and you have to cover the cost of the trade minus the refund value. Which in this case was 10%, so that’s $400 – 10% = $360. Please note the payoff value and refund value is different for each trade and it doesn’t matter how much you win or lose by, the payout is the same.
Binary Options in the Movies
If you’ve ever seen the James Bond film Casino Royale (the new one with Daniel Craig) you’ll have seen Le’Chiffre place a binary option trade on Skyfleet stock. He buys a Put (meaning he thinks the price will fall), after Bond thwarts his effort to destroy the plane, Skyfleet stock rises and Le Chiffre has to cover the cost of his trade. This is an extreme example but you get the idea.
Of course you don’t have to resort to blowing up planes to make money with binary options. You can use your normal market intuition and technical analysis, but we’ll cover binary option strategies in another post.
For now here’s a list of top binary option brokers for you to take a look at. This is not an exhaustive list by any means, the last time I counted there were over 70 binary options brokers, but some of them simply offer white label platforms.
|Broker||24 Option||Any Option||iOption||Trader XP||Option Bit||Option Fair||IKKO Trader||EZ Trader||Banc de Binary||Trade Rush|
||Join Now||Join Now||Join Now||Join Now||Join Now||Join Now||Join Now||Join Now||Join Now||Join Now|
|Allows US Traders|