Binary Options - What are they and how do they work?

[irongoose]

UPDATE: It doesn't look like I'm going to win the contract that expires at 7 pm tonight and at this point it looks like I'm going to take a full hit of $48.50!
I wasn't paying attention to the trade the entire time so I don't know if I could have exited the trade with less of a loss because at this point I can't close the trade anymore, I suspect they lock you in one hour before closing.

View attachment 18144

Here is another example of a trade today I took after losing the first one above, once again I longed (buy) the USD/JPY but this time I took two contracts out with a risk of $90.00 (cost of each contract $45.00) and a pay out of $110.00 (each contract worth $100.00 at expiration).

In this example you can see that I'm in the red and the contracts are losing money.

But in this example of the same two contracts look what happens to the value of them when price moves above the target price. Notice also they aren't set to expire for another 2 hours and 34m.

In either case I could have closed these contracts early and either lost the amount showing or profited the amount showing.

 

[irongoose]

Here is another example of a trade today I took after losing the first one above, once again I longed (buy) the USD/JPY but this time I took two contracts out with a risk of $90.00 (cost of each contract $45.00) and a pay out of $110.00 (each contract worth $100.00 at expiration).

View attachment 18145 In this example you can see that I'm in the red and the contracts are losing money.

View attachment 18146 But in this example of the same two contracts look what happens to the value of them when price moves above the target price. Notice also they aren't set to expire for another 2 hours and 34m.

In either case I could have closed these contracts early and either lost the amount showing or profited the amount showing.

Well here is an update on the two contracts, price has really taken off in my favor and now they are worth $91.00! Keep in mind the max profit I can make is $110.00 so with the price at $91.00 its probably a good idea to close them and not risk price reversing direction and closing below the target price of 119.40.............but I'm not going to do that because I'm greedy and its only a practice account.

 

[irongoose]

Well here is an update on the two contracts, price has really taken off in my favor and now they are worth $91.00! Keep in mind the max profit I can make is $110.00 so with the price at $91.00 its probably a good idea to close them and not risk price reversing direction and closing below the target price of 119.40.............but I'm not going to do that because I'm greedy and its only a practice account.

View attachment 18147

With one hour to go my two contracts are now worth $102.00 ! keep in mind I can close them out now and that the max profit I can make is $110.00.

 

[irongoose]

With one hour to go my two contracts are now worth $102.00 ! keep in mind I can close them out now and that the max profit I can make is $110.00.

View attachment 18148

With 13 minutes left before my two contracts expire even though the value has fallen unless the price drops below 119.40 I'll win the full payout that will net me $110.00. Anyway I posted the entire page for those of you that are curious as to what prices look like when contracts are about to expire so you have some idea, also take notice to some of the other things that can be traded on the left hand side of the screen.

 

[irongoose]

Hey everyone I'm posting another binary trade I took 1/12/2015 on a long with the USD/JPY this time the target price is 118.80 by 11PM tonight. Currently the spot price is around 118.30 and the contract has no value so its best to let the time expire on it because I wouldn't save anything closing it now. When I purchased the contract the spot price was above the target price of 118.80 and there for I paid a premium for it $60.50 to be exact. So if I was to win this contract my profit would be $100.00 - $60.50 = $39.50.

I want everyone to take notice to the prices of contracts in the Red and Blue columns, you'll notice if I was to buy the same contract now with a target price of 118.80 it would cost only $4.00! And I could make $96.00 on it if I was to win that contract! So lets say there was something you saw on your charts that convinced you in the next 3 hours and 30 minutes price could reach 119.80 you could load up on $4.00 contracts and lets say you bought 10, 10X4=40 so for $40.00 you could hold 10 contracts worth $96.00 a piece at expiration netting you 10 X $96.00 = $960.00 !!!!! Hows that for a risk reward ratio? Keep in mind also no matter how low the price gos you'd only lose $40.00 and you can't be stopped out. Also the price only has to be above 119.80 by a fraction to win the contract at expiration plus if you didn't want to take any chances of losing you could always close them early as they become more valuable.



Left click on image one time to expand.

 

[Pharaoh]

Interesting. Also, this looks more like exchange traded options than simple binary options (above/below X price to gain $80/lose $100).

 

[irongoose]

Interesting. Also, this looks more like exchange traded options than simple binary options (above/below X price to gain $80/lose $100).

You are correct, Nadex is an exchange and not a broker and they don't profit from ones wins and loses, I did mention that they are the only ones I'd consider using if I do decide to start trading binary options. The whole purpose of me posting these trades were to give people an idea how binaries work at least with Nadex and to show people that binary trading can be profitable and not gambling with the right approach to how one views it and trades it.
I'll mention this one more time for anyone who missed it in one of my posts.............if you think you are going to jump from spot trading to binary trading after failing at trading spot YOU ARE FOOLING YOURSELF,go learn how to trade first before trying either with real money.

By the way I lost that last trade I posted.

 

[jimo]

Be very careful. I have been scammed by UKOPTIONS in the UK. Took $5535 off me.

 

[NicholasM]

From my experience I have come to learn that it is quite easy to make money trading binary options, and it is also easy to lose it. However, it is even harder to get it out once you make your profits. The challenge here is getting a realistic broker. Otherwise, I like the speed with which binary options allow traders to double their money. It could be within a few minutes or hours.

 

[irongoose]

IG Markets are the ones behind Nadex in America, Nadex is regulated by the CTFC in America and are an exchange and not a broker. Unfortunately if you live outside The US Canada and Mexico you are not eligible to trade on the Nadex exchange. But IG Markets offer binaries out of England, I'm not sure if that's a good or bad thing because I haven't researched them over seas and I'm not going to either but heres their link if you are interested.

Binary Trading | Day Trading | Binaries | IG UK