Binary Options Trading Example
Binary Options Trading in Practice
Being one of the pioneers of binary options trading, EZTrader realizes the importance of providing as much information as possible to its traders – whether you’re conducting your first trade or already a frequent user of our platform. We’ve found that one of the best ways to clarify many questions is to offer our traders examples of how to conduct trades and apply techniques.
To understand more about how to conduct a binary options trade, we’ll take a look at placing a trade on the Nike stock.
Step 1 – Choosing your asset
The first step in trading binary options is to identify an asset you have an interest in. Having some existing knowledge on an asset can be helpful so it is a good idea to review the complete list of available assets and then select the one that you feel most comfortable with. You may decide to trade on Nike stock if you have an interest in the sports manufacturing industry and readily follow the US markets. Once you’ve decided you’re going to trade on Nike stock, you will then be able to start researching the stock.
Step 2 – Determining a price direction (call / put option)
If you look at the charts on Nike stock, you’ll get a good idea of how its price is trending. You can also research some of the financial news available on Nike to see if there is generally a positive or negative sentiment in the marketplace for the company. There are a range of resources available for you on EZTrader, including comprehensive guides and articles, weekly market reviews and articles on advanced trading techniques. From these resources, let’s say you found out that Nike was about to release its quarterly earnings figures in the next few days and you believe that this may have an impact on the price of Nike stock.
These tools will help you develop a position on whether you think the price will rise or fall by the listed expiry time. If you believe the price will rise upon expiration, you should execute a call option on Nike stock. If you think that its value will fall upon expiration, you’ll want to place a put option. This decision will determine if you’re successful in executing the trade or not.
Step 3 – Potential outcomes of the trade
After you’ve executed your trade, it is a matter of waiting for the expiry time to arrive to find out the outcome. When trading binary options, there are three outcomes that can occur – In the money, Out of the money or At the money. For example, if you placed a trade on Nike stock at a strike price of $55.02 and it rises above this price upon expiration, you would be in the money. This means that you could experience a profit of up to 95%. Alternatively, if the value of Nike stock falls below $55.02 you would be out of the money. In this instance, EZTrader will still refund you with a certain percentage of the amount traded, thus enabling you to keep on trading. Finally, if the value of Nike’s stock stays static at $55.02 upon expiration your trade would expire at the money. In this scenario, your trade would again be considered unsuccessful but you will still get some of the money you traded back compliments of EZTrader.
Trading on a stock such as Nike offers a great example of how simple the process of trading binary options is. With a wide range of assets to choose from, Nike is only one of the many options that can be traded on EZTrader using the same simple steps demonstrated above.