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Bitcoin Binary Options
How Bitcoin Binary Options Beat Day Trading
Binary options and traditional day trading may have their own share of similarities. Having adequate knowledge of the latter is not a sure ticket for investors to easily adapt to the world of Bitcoin binary options.
Both financial instruments give investors the right to buy or sell an underlying asset at a specific price. This can be in the form of stocks, currencies, indices, bonds, and commodities.
Operations run under the principle of trades that have a settlement price (also known as strike price), and an instituted expiry time which is decided before the trader enters. Moreover, all option trades are bound to expire at some point following the settlement.
Clearly, both tools make profits, or in a worst case scenario, lose investments on the financial market. This is where the resemblance ends as a different experience await future Bitcoin binary options traders.
The distinguishable factors
- Risk, rewards, and payouts
Bitcoin binary options solely rely on the outcome of a yes or no market theory. Returns or losses are based on a given fixed number, prior to making the trade option. Alternatives such as the all-or-nothing option prevent investors from losing more than the initial investment. Refunds of up to 15 percent are also available on some of the binary options brokers available.
However, day traders face a different framework. The style of trading they engage themselves into are opened and closed during the same trading session. Profits are also determined by a number of factors: entry and exit prices, number of shares, and contracts. Furthermore, traditional options can be leveraged. This increases the rewards but at the same time increases the risk.
- Expiry time
Yes, expiry time will fall under both similarity and difference among the two. This is a notable difference that makes Bitcoin binary options a unique trading market.
Traditional options offer longer expiry points which can last for a month or even years. Whereas binary options trading platforms are able to offer weekly, daily, hourly, and 60 second options. This defines the fast trading involved in its niche.
- Trade ending
Moreover, all binary options trades must reach the expiry time before the outcome is known. This gives it the fixed-return option trait, as opposed to traditional options where traders are allowed to close out trades even before the expiry time is reached.
Each trader should know the benefits of the contracts’ fixed returns, though. An advantage is that investors are already informed of the losses they may incur, as compared to day trading, nothing is certain. This aids their decisions, most especially the amount to be invested in the option.