An option which pays the fix amount upon termination or nothing, depending whether the set standard or criterion was met, is deemed digital options. They are also referred to as Binary Options or Fixed Return Options (NYSE:FRO). Binary options make the dream come true for the investors, as they allow them to fulfill their requirement of high earnings through the single bid made on stocks. To make the characterization of Binary Options which even a lay man can understand, it can also be written as,' the type of trading options that offers you only two outcomes.' The option will be a 'Yes' or 'No'; a '0' or '1'. In the terminology of the trading, it's that either you gain the returns or losses the investment. This feature of digital option makes it trouble-free to estimate precise figures of gains and losses during trading.
Digital options are like European options because it can be traded only at expiration and is unlike American options. American option is altogether a different ball game, as it can be traded any time and for this reason Binary Options is poles apart from American Options. The reason why most of the investors trust digital option is that they get their money back even when the bid set out to be wrong. When kept at par with forex and traditional trading for matching up, the binary option outfox the former as it is less risky. The reason why the Fixed Return Option outmaneuvers the former is that in it the bids are made on the shift of the market and not on the basis of the volatility of the stock i.e. up and down of the price.
There is a high wave seen in the stock market because of digital options coming in to the picture. It is like a 'knight in the glowing armor' for those people who wants to make money at a blink of an eye. It has many advantages that have turned people to stock market. For instances limited risk is associated with your investment; a person can kick off with small investment; no middlemen are involved so the cost cutting is possible in case of commissions, fees or hidden costs; and the most astounding one is that the return s known beforehand. On the flip side of this, it has certain drawbacks also such as potential wining trades will always be less than the potential losses. Despite of this flaw of this option, it cannot be done away with.
For a novice, it is advised to take the core knowledge of the digital option because large investment is blocked in the shares and they can't go blindly. The gaining information relating to Binary Option will prove to be handy to a person and will turn out to be a fruitful investment. The success ratio in such options tends to be 60% to 70%, and these people normally speculate with their experience and keeping in mind the multiple benefits offered by it.
Kelly wagenheim is an experienced trader of stocks, currencies, commodities and many more. In the wake of rising popularity of binary or digital options, he offers all kinds of updated market news, strategies and tips related to digital option through his website. Visit the site to expand your trading knowledge.