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portfolio diversification

How To Effectively Reduce Risks When Trading Binary Options

In spite of the fact that you have no way of removing the element of risk altogether from trading, the truth is that being aware of the possible challenges you could face can help diminish some of the uncertainty. Knowing what you’re up against is essential in this type of investment because it allows you […]

By binbet.com | Reduce Risks | analysis, minimizing risks, portfolio diversification, position, trading strategies | 0 Comments | Like

… But What’s a Binary Option?

A binary option is a type of option where the payoff is either some fixed amount of some asset or nothing at all. The two main types of binary options are the cash-or-nothing binary option and the asset-or-nothing binary option. The cash-or-nothing binary option pays some fixed amount of cash if the option expires in-the-money while the asset-or-nothing pays the value of the underlying security. The options are binary in nature because there are only two possible outcomes. They are also called all-or-nothing options, digital options (more common in forex/interest rate markets), and Fixed Return Options (FROs) (on the American Stock Exchange). Binary options are usually European-style options.

For example, a purchase is made of a binary cash-or-nothing call option on XYZ Corp's stock struck at $100 with a binary payoff of $1000. Then, if at the future maturity date, the stock is trading at or above $100, $1000 is received. If its stock is trading below $100, nothing is received.

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Tag Archives: portfolio diversification

How To Effectively Reduce Risks When Trading Binary Options