Binary options provides a very big advantage of being traded in different financial markets. Willing sellers and buyers of binary options in various markets trade them with a view to make profits. Binary options are associated with high returns and this is what each trader aims to get. In other traditional trading options, profits are directly related to the magnitude of price change and hence cannot be known or predetermined. However, this is not the case with binary options, as here the profits are not dependent on magnitude of price change but only on the direction of price movement. Hence, whether the price moves by a cent or a dollar, the profit would be the predetermined payout, which could be as high as 70%.
Binary options can be applied to the commodity markets as well. There are several parties involved in the commodity markets like traders, manufacturers, sellers, producers and dealers. This leads to a huge turnover in the market as each of these is trying to trade and earn profit. Commodities here include agricultural products like coffee, wheat, pulses etc. and metals like gold, silver and platinum.
One area where binary options are highly applied is hedging of funds. Hedging funds through other options is far riskier than hedging them with binary options. Traders here adopt a strategy to buy options as per the market situation and their anticipation.
If the prediction is for an upward trend, the trader buys a binary call option while if the anticipation is for a downward trend, he buys a binary put option. However, to hedge his position, a trader buys a call and a put option for the same asset, thereby securing his position. Whether the price rises or falls, he is in a safe zone as either of the option would land “in the money,” thereby enabling him to make the predetermined profit.
Binary options find a very suitable application in the foreign exchange market as this is a highly unpredictable market. New investors or traders can simply not trade forex without expert help. Moreover, the complexity of trade and the volatility deter the best of traders from investing in the forex market. Binary options, however, are very handy in such situations as they provide limited risk with limited capital investment. When binary options are used to invest in forex, the trader only needs to anticipate the direction of value of one currency with respect to the other. Forex Trading with binary options provides traders the opportunity to trade a highly volatile market with limited capital and limited risk. Moreover, by simply anticipating the direction correctly, one can earn high returns of up to 70% in a short time span.
Therefore, binary options are highly applicable in various financial markets and in each; they provide high returns within short time durations. Traders of binary options can benefit immensely if they execute the trades well. For this, they need to study the markets and the assets, which they want to trade in. this way they would be able to get a hold on the market and anticipate the direction carefully and correctly.