Binary options were first introduced to retail investors in 2008 on the Chicago Board of Options Exchange. Since that time, the world of binary options has experienced a booming growth, especially among online traders. It’s a growth seen not just in Canada, but also in the United States, England and many other countries.
The growth of binary options makes sense, particularly when online trading has become so accessible and when so many individual online investors now decide to forge their own investment path and make their own investment decisions.
There are plenty of positives that come with this new trading market. But, before discussing some of the benefits that binary options provide, let’s back up and briefly explain what binary options
are.
“Binary options do not trade in the market, but on the market.”
That’s a description that’s been used more than once to introduce the concept of binary options to traders. On a fairly simplified level, binary options give traders the opportunity to trade on their belief as to whether a chosen asset will rise in price (a trade known as a “call”) or lower in price (a trade known as a “put”) within a specified time period.
As made clear by the ‘binary’ term, call and put trades are the only two investment possibilities that binary options care about. If the chosen asset rises within the specified time and the trader made a call, then the trader earns money. Similarly, if the chosen asset lowers in price within the specified investment period and the trader made a put trade, then the trader also earns money.
Binary options are a simple way for individual traders to benefit and invest in market movements, which is one reason why they have seen such growth over the past seven years.
As binary options trading has grown and as more brokers have come to offer this trading opportunity, the landscape has also increased in complexity and in variety of trading options.
Binary options traders can trade on asset categories that include indices (Nasdaq, Dow Jones, FTSE and many more), the Forex market (combinations of all major currencies, USD, CAD, JPY, etc.), the commodities market (gold, silver, oil, corn and again many more) and stocks.
New types of binary option trading have also emerged, primarily as it relates to the
timing of the trade. When binary options were first introduced to the market, the model was fairly simple – a trader could make a trade based on whether he or she felt the asset would increase or decrease in price – all within a standard amount of time.
Now increasingly brokers are introducing different binary types like 60 second binary options and ladder binary options and one touch binary options.
These binary option types have attracted quite a bit of attention among traders. However, since they are still fairly new, they deserve brief explanation.
60 second binary options allow traders to make a trade based on market movements happening within 60 second increments. 60 second binary options give traders an opportune way to execute a lot of trades within a short period of time. That means that traders can really capitalize on strong market movements.
Ladder binary options are a little more complicated and have been the subject of some confusion. In general, when a trader chooses to take advantage of a ladder binary option, he or she has the opportunity to pick an asset and then set three different strike prices and three different expiration times. As the asset moves past these strike prices, the trader earns a certain partial payout.
Finally, there is what’s called
one touch binary options. One touch binary options give the trader the opportunity to trade based on whether he or she believes that an asset will reach a given price. In trading through one touch binary options, a trader must not only accurately predict the direction of market movement, the trader must also be accurate as far as whether the asset will reach the target price. It’s important to note that brokers traditionally offer one touch options on weekends, when markets are closed.