Binary Options and Basic Terminology

All financial markets have a way of expression. All related terms and phrases Binary Options are mentioned here. In Forex trading there and spread pips and Binary Options terms In the Money exist (in the money) and Out of the Money (out of money).

The following are some explanations about the primary terms used to describes the binary options market.

• Binary Options: The basic explanation is that as indicates the meaning of the word "binary" with binary options, there are only two possible outcomes. If you have the correct prognosis you get benefits; if incorrect lose your money. How much gain or lose in binary options? Well, that depends on your initial investment, but huge risk of unexpected losses or obtaining astronomical profits.

• Call Option: When a trader predicts that the price of an instrument will increase. Even if the price is increased by a tenth of a penny, you benefit from a binary option.

• Put Option: When a trader predicts that the price of an instrument will decrease. Even if the instrument falls by a tenth of a penny, you benefit from that binary option.

• In the Money or In the Money: If you "win" the investment is known as "in the money". For example, if you place a call option, and the price increases, then it is "in the money" of the binary option. On the other hand, if you place a put option and there is a decrease in the price will also be "in the money".

• Out of the Money or Out of Money: If you lose the investment is known as "out of the money". For example, if you place a call option and the price decreases and wrong, you are "out of the money" in binary options. On the other hand, if you place a put option and the price increases, it is also "out of the money".

• At the Money or In the Money: If the price of the instrument is identical to the expiration date in this scenario, not even at a disadvantage or advantage, and your investment is returned in full with binary options.

• Expiration Date: The time or date of expiry binary options and the price will be considered depending on the platform.

In conclusion, at first glance, some terms of binary options may seem confusing, but after some reading, everything is resolved and becomes understandable.

How to Cover Your Forex Binary Options Positions

A simple rule of negotiation: Binary options are excellent hedging tools in conjunction with conventional currency positions.

First, let's look at the binary options acting as a hedge against traditional Forex:

1) Limited Risk / Reward: Unlike traditional Forex, binary options have two fixed and predetermined results. Either you are in the money 85% return, or if you are out of money (either to the amount invested or less depending on the instrument).

2) Stop Risk: Unlike traditional Forex market with binary options can never lose more than the invested capital. No need to place stop-loss in Binary Options.

3) No Leverage: Unlike traditional Forex, binary options trading requires no leverage to succeed. You can benefit without risking a single cent more than the amount you want to invest. Since you already have your stop loss in their traditional Forex positions, you can use your binary options trading to hedge against positions of their currencies without using leverage.

4) Directional Coverage: Unlike traditional Forex, binary options you only negotiates on the direction in which the active close to maturity, either higher or lower. Therefore it allows you to place your coverage negotiating a CALL or PUT for the opposite direction of its position in the traditional market.

Let's review an example of the implementation of its coverage of traditional currency binary options:

Let's say you take a conventional position Forex EUR / JPY (short or long) in combination with a stop-loss. To cover simultaneously will buy a binary option, either PUT or CALL, in the opposite direction of its position in the traditional market Forex. What he did is cover your losses or help to be profitable, even if that position (short or long) fails.