What Is Binary Options 1?
BinaryOptions1.com is an informational site for binary option trading. You will find out how to trade binary options, where to trade binary options, and where should and can you trade binary options.
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Binary Options Vs. Regular Options With Premiums
So you read the article title and it makes you ponder how this might be relevant to your day-to-day life. Believe me it is. Some of you may not even know what binary options are. However, those of you in the financing business know that binary options are a fixed amount or an asset in which it can be useful, but in other cases it may not. Binary options ask a simplistic yes or no question; if you think yes, then you buy the binary option, if you say no, then it is most likely that you sell.
To understand the relation, for instance, you would most likely buy a binary option that says that a piece of gold will be over $1000 by 10pm EST today. When it comes to length, many binaries are less than fourteen days. So, you pay $30 bucks and if you win you will get a payback of $100, which is pretty decent right? The time moves on, the clock slowly ticks away and before you know it, it is already at 9:50, the gold has hit $1000. And so you collect your rightful amount of $100. That wasn’t so bad right?
However, lets see things from a different angle now. You buy the same binary option; yet, the gold plummets. Now we see that the price of the piece of gold is down to $900 at the end of the binary’s time period. This is where people talk about the irrelevance of binary options. What you lose is still just the $30 you paid for it.
Now that we understand what binary options are, lets take a closer look at the bigger question. What are Option Premiums? To be able to determine which of the options between Binary and Option Premium is best, we clearly need to be able to tell the two apart. So what are they?
Option Premiums are the amount per share that the buyer pays to its seller. Option Premium is generally influenced by the difference between the stock price and the strike price. Influencing the Premium to a minimum degree are factors such as, market conditions and interest rates. Certainly, the value of the option decreases as the expiration date gets closer, and after it expires, the options are called wasting assets. So technically, option premium is the income received by the investor or seller, in which he/she gives to another person.
Lastly, I believe that the option premium is a far greater choice in the trading business. Therefore, while binary options with no premiums are still being used, it is still considered risky. Though the trading might seem fair based on different price decay it is also fair on both sides. You either lose or you gain, which is inevitable. On the other hand, when it comes to option premiums, the option is normally based on interest rates and market conditions. In both cases though, if the market plummets, so does the option.