Binary Options are one of the latest trading trends to hit the online space in South Africa. Traditionally, it was very complicated and difficult for retail customers to trade binary options. With the advances in technology and the growth of online trading, trading binary options online is now possible and can be extremely lucrative if done well.
Binary Options Basics
Essentially, a Binary Option is an asset. Users can trade this asset on the open market. Trading involves a “Put” or a “Call” action. A “Pu”t is when the trader thinks the particular stock price will increase while a “Call”, is when a particular stock price will fall. The simplistic thing about Binary options is that its not necessary to determine by how much the stick will go up ro down, traders simply need to predict whether it will in fact move in either direction. As such, trading options has been around for decades but Binary trading is a new and unique type of asset allowing traders to simply make directional “bets” without paying a premium.
When trading in Binary Options, depending on the brokers you trader through, the approximate payout is between 70-80%. The fact that this payout is so high, allows traders to make decent returns on relatively small moves. In addition, when trading binary options, traders can also hedge their trades in order to cover their initial risk.
Binary Option Trading are typically traded by general, everyday and over the counter type investors. This is one of the main benefits of trading binary and it can easily be done at a number of trusted websites. In the past, if investors wanted to trade binary options, they would have needed a broker to facilitate the trade. With the growth in onlien trading, binary Options can now be traded via a number of trading websites and platforms without needing a broker. One of the biggest advantages of trading Binary options is that they remove alot of the market volatility and uncertainty by cementing the rewards, odds and potential risks and therefore removing the necessity to exercise your options to achieve gain.
How does Binary Options Trading Work?
Within South Africa, one of the most popular online stock indexes is called the South African 40. This index covers trading on the 40 most popular stocks that are available on the Johannesburg Stock Exchange. If you relate this to Binary Trading, traders can trade on the how the SA 40 index will close off on a particular day. The outcome is decided using a simple YES or NO formula. For example, if you answer YES, that the SA 40 index will trade up then the binary will settle at 100. If your answer is NO that the SA 40 index will trade down, then the binary will setlle at 0.
Some of the biggest benefits of trading binary options include a significant profit potential in the short term. Because binary trades are influenced by news and general market conditions, this allows potential investors to try and capitalize on these short term movements. Another benefit of trading binary options includes the limited risk factor. What these means for traders is that they cannot lose more then their investment. As with other online financial trading instuments, you can go long or short on your trades and can thus buy or sell any binary using this principle. Finally, in most online binary platforms, the only major cost or fee is the dealing spread.
Usually, most binaries can be traded on the JSE everyday between 9.05AM and 4.50PM, (South African local Time). The following table outlines a very simple binary trading example usng the SA 40 index.
Binary Options Trading Strategies
Because Binary option trading is still a relatively new form of trading, there are limited amount of trading strategies available. These strategies include the following:
- Bullish Strategy – This strategy implies that a trader feels that a particular asset will follow an upward trend and thus gain value
- Bearish Strategy – This strategy implies that a trader feels that a particular asset will follow a downward trend and thus lose value
- Binary Fence Trading – This kind of strategy allows the trader to gain no matter what direction the particular asset moves in
- Binary Range Volatility Trading – This strategy implies that the trader feels a certain asset will trade within a certain price range, whether it go up or down
The derivative or financial instruments market offers an opportunity for traders to trade on the movements of financial instruments without the trader having to buy or own the actual stock or asset. Trading a binary option is thus suited to traders that prefer trading on and index or non-physical asset. With Binary options, it is only concerned whether the price of an asset moves in any direction i.e. up or down. As such, when trading binary, your trade only needs to be one single “tick” or “point” in the money in order for you to make a gain on that perticular trade. For instance, on a spread of 5-12, if you buy at 12 and end up in the money, you will minus 12 from 100 to get a return of 88 points.
Binary Option Brokers
There are a number of top tier online binary option brokers that traders can work through. As a South African trader ourselves, our preferred Binary Option trader is iOptions. They offer a solid trading platform covering a numner of assets which include Forex, Commodities, Stocks and various other securities. They offer an extremely advanced South African trading deskwith 24/7 fast and friendly customer support. iOption are fully licensed and regulated to offer Binary Options trading. Check iOptions here.