What are the Advantages and Disadvantages of Binary Options?

Binary options are one of the markets you can get into if you want to trade assets in the market. You can earn quite a good deal of money by investing in binary options, but before you cash in, there are a few things that you should know about investing in binary options markets.

What are binary options?

A binary option is a type of investment wherein payout is an asset, fixed amount, or nothing. There are two distinct binary options namely asset or nothing or cash or nothing. The cash or nothing binary option pays out a certain amount of money once the option expires. Meanwhile, the asset or nothing binary option pays out the value of the security that you bought and traded in the market. In the binary options market, there are only two outcomes, hence the name ‘binary options’. Binary options are also known as digital options, all or nothing options, or fixed return options. If an investor believes that the market will peak, the investor would buy a ‘call’. On the other hand if an investor thinks that the market will sink, she or he will buy a ‘put’.

When you invest in a binary option, the potential payout is determined even before the asset is bought. Binary options are available for purchase in most financial products and can be purchased through put/down or call/up options. The ability of a binary option to be purchased in both directions enables investors to go short or long on a wide variety of financial products that are being traded. Binary options have a fixed expiration which can be 30 minutes or towards the end of the trading day.

What are the advantages and disadvantages of choosing to invest in binary options?

There are advantages and disadvantages when it comes to trading in binary options.

Advantages

Risk Control

Even before you start investing and trading you will determine the amount of money you would like to invest. After determining the amount of money you would like to invest, the amount that you can earn or lose will be revealed to you. You will know the return you will get even before trading begins. If you think that you will be unable to get a good return, you can increase or decrease the amount you want to invest.

Big Payouts

The biggest advantage of trading in binary options is that you can easily make more than 80% of your investment in a short amount of time.

Low Capital Requirements

The binary options market allows investors and traders to start with only $25. Unlike traditional options, binary options enable you to start trading with such a small capital investment.

Short Trading Periods

Another advantage of joining the binary options market is that the trader chooses the expiry date. The trader can set end of the trading day, end of the week, or even end of the month expiry dates.

Disadvantages

Loss of Gains Quickly

Binary options can net you a return quickly but it can also lead to a huge loss quickly. If your prognosis is wrong, you will end up losing up to 95% of the investments you put into the market.

Limited Tools Available

Since a trader only has two options when it comes to trading in binary options markets, there are not that many tools that can help a trader navigate the market.

These are some of the disadvantages and advantages of trading in the binary options market.

Should you invest in binary options?

The simplicity of the binary options market makes it the perfect trading ground for budding traders and investors. One can also easily make a profit through the binary options market. The advantages of trading in binary options market outweigh its disadvantages. But it will depend on your objectives if you want to invest in the binary options market.