What is The Importance of Planning Out Your Binary Options Trades?

In an increasingly volatile market environment, retirement investors, day traders, and finance professionals alike are looking for new strategies to reduce risk and increase returns. The old-fashioned buy-and-hold philosophy no longer suits the needs of most investors as market volatility has forced all but the most steel-nerved retirement investors to adopt more nimble strategies to remain profitable from day to day. Fortunately, binary options offer a key opportunity for seasoned traders and investors to take advantage of natural market swings with minimal risk to one’s principal.

Because this financial product is relatively new–having first been approved by the Securities and Exchange Commission in 2008–there exists a tremendous opportunity for traders to harness its power before the market becomes too crowded. These European-style options are simpler than their “vanilla” counterparts. Each one represents a bet on an underlying security: traders who buy binary calls are betting that the security will close above an established value come expiration day while traders who buy binary puts are betting the opposite.

Also known as “all-or-nothing” options, these options offer only two possible outcomes: either they expire worthless, in which case the trader loses the premium he paid for the option; or they expire in-the-money, in which case the trader receives an agreed-upon amount and makes a tidy profit. The beauty of binary options lies in this simplicity. Unlike more complex derivative products or even traditional vanilla options, traders need not spend hours or days researching the fundamentals of the underlying index or security. Rather, savvy options traders need only understand the security’s technical trend line and the broader market’s likely direction during the option’s term.

Binary options are thus the perfect vehicle to harness the market’s volatility. Because anyone who trades these products is essentially making a bet on the market’s direction, keeping an ear to the ground is key. Successful options traders understand that financial markets are increasingly sensitive to news and trends breaking around the world and thus keep abreast of the latest macroeconomic developments, timing their trades appropriately.