Binary trading is a simple concept, based on a prediction of the outcome of a certain asset’s price and guessing whether it will be higher or lower over a certain period of time. However, even though this may sound simple, if you really want to be sure that you will guess the outcome correctly, it requires some time, devotion, learning and staying informed all the time.
In order to facilitate the trading process for the traders, binary signals have been incented. They are basically predictions on the outcomes of certain assets, determined by a number of factors. They are formed based on the charts of the assets’ prices fluctuation, and they can reach the trader in various forms.
You can subscribe to a binary signals service which will provide you with suggestion whether to “call” or “put” a certain option at a specific time, and it is up to you whether you will take the suggestion or not. These signals are usually delivered to the traders via email, SMS, on the signals provider’s website or via an app that can be installed on a computer or mobile device, in order for the trader to be able to see the signal on time and be able to react accordingly.
Binary signals are also used by binary robots, which serve as automated traders performing the trade on your behalf. Signals are usually created automatically and they are only occasionally checked and verified by human experts, but it depends on the signals provider. When you connect your trading account with a binary options robot, the only way that the robot can execute the trades is to follow the signals which tell it whether to “call” or “put” a certain option.
Binary signals have both good and bad sides. They can significantly reduce the time you spend exploring, reading and following the fluctuations in prices, and it is especially significant if you are a beginner and you are still not able to perform these activities with sufficient accuracy and reliability. If you subscribe for signals that are created automatically and checked by trusted human experts, then the chances they are accurate are higher, together with your chances for successful trading. On the other hand, no matter how complex the algorithms are and how many sources are used to generate a signal, binary signals have still not achieved accuracy that exceeds 70-75%. Even the top binary robots can reach this accuracy and they rarely go over it. It is important to know that, when a binary signal provider offers accuracy over 80% or even higher, it is not the average amount of won trades, but the highest amount of won trades per session. This number can, therefore, vary from trade to trade, and there is no guarantee that you will have the 80% or higher chance of winning every trade if you decide to use these signals.
Binary signals can serve as a useful tool while you are still at the beginning of your binary trading career, but keep in mind that nothing can replace your educations, hard work and knowledge.
Binary options are unique in the field of trading because no matter what option make you earn money by creating a contract and waiting to see whether it will come away as true or false. There are several types of options that can be taken but it comes down to true/false answer at the end. In general Binary options trading is most speculation based trading that exists, and some even speak of it as plain gambling (which will not turn into debate in this article).
Binary option is called option but in general sense you don’t have to worry about puts and calls. There are few options that include these options but it is not standard put and call option, because once you pick out one of them you will get profit once your choice is proven true and price reaches your option. It doesn’t really matter how much that price exceeds your option as long as it exceeds it and fulfills the terms of the contract. In order to make profit seller will hope that the price will stay below stated strike price while buyer hopes that the price will go over that same strike price. In contradiction to normal call and put options a buyer will not place a binary put if a price is expected to decline, he will sell that binary option. And if there are expectations of rise of that price then trader is going to buy that option, which is clear difference between binary and other options.
Every binary option has four main or primary components that create it is essence, instrument or the asset, strike price which is in most cases current price of the asset, expiration date on which option ends and results come and payout as the final step in binary options trading. In most cases there are four different types of assets that are used in binary option, stock index which in most cases include up to 50 or sometimes 100 main stocks from the stock market, commodity comes in only few different types, spot forex in this case meaning major currency pairs coupled with few exotic currency pairs and in some cases forex pairs that are connected with the country form which brokerage of the binary options trading market you trade over comes, and binary options traded on basis of economic data releases.
Current price of the asset in question is the center of the binary options trading. There are binary options that range from months to minutes, and those minute options have very narrow range due to time it takes for asset price to move. Daily options have middle range while the weekly and monthly options have very wide range due to the fact that price may move over and under strike prices sever times during that time. Length of time that price is in the money doesn’t mean anything, because only thing that matters is the location of price on the expiration date.
If you are interested in exact details on binary options and software that comes with them just search for binary option robots and you will have no problems in finding information.
In this article I will lightly touch the subject of classification of stocks, but I will not delve deeper into the preferred stocks. Well, I said it, there are your normal everyday common stocks and there are preferred stocks. I mention this because I will write about common stocks, their classification and more general things about them.
When it comes to common shares/stocks and their classification we have four important axioms to remember:
Authorized shares are all shares that were authorized on the creation of the company. These shares exist from the beginnings of the company and they are not present on the market until number 2 happens.
Issued shares are stocks that were authorized by the company and sold to the interested investors.
Outstanding stocks are stocks that belong to the investors who bought them. To become outstanding a stock must be issued. It will remain as outstanding stock until company decided to buy it back from market, in which case it becomes number 4.
Treasury stocks are all stocks that were bought back from the market by the owning company. These stocks have no rights when they become treasury stocks. There are few reasons for which companies buy their own stocks:
By limiting number of their stocks on the market they aim to increase their overall worth.
To provide trading instruments for their employees.
To increase the number of shares when acquisition of another company happens.
Prevention of possible takeover by members of the other company.
When a company decides to issue shares and sell them as stocks they will do that on so called par value, a value of those stocks which is far below their expected price on the market. But sometimes that par value is replaced by stated value, which can be found in financial records of the organization that issued that stock. Basic reasoning behind this is the speed in which cheap stocks are sold.
When a company faces liquidation all stock holders have the rights to residue, but the rights of the common stockholders are small and they come in the third place when it comes to residue, in most cases all is taken by creditors ad preferred stockholders.
Now, for the end of this article I will talk about stock splits, what they are, why they are done and so on. Stock split is a right of the owning corporation which once it is issued will split all stocks in two while halving their price. For example if you had 200 stocks that had a worth of 30 dollars per single stock a stock split would double your stocks and you would have 400 stocks, while it would halve the price and they would be worth only 15 dollars per share. There are also other ratios in which they can be split. Reverse stock split is vice versa of the original one as its name suggests.
Stocks that are used in binary trading (Best Binary Options Brokers like sites) are not included in this article due to their relevance to this particular topic.
A main bulk of insurance policies are standardized, while others are not and they are applied by smaller number of companies. Main reason for standardization of insurance policies is to integrate them in law and prevent policies that are against law. Every policy of an insurance company has to be integrated in law in order to stop abuse of power and knowledge when it comes to paying insurance to the victims. vAnd with policies that are backed up by law insurance company can go to court and be sure that their victory is certain.
There are several sections in which insurance policies can be divided and they are as it follows:
Declarations represent all information about risk and the applicant. In every insurance declaration paper the name of the applicant will be present as well as insurance company, property or anything else that is insured, period and so on. There are couple of differences between life and property insurance, but in general they contain all important information for both sides of the deal.
Definitions exist so people can easily understand fine points of every contract. Insurance companies will make a long list of definitions to protect themselves from insurance fraud. Those definitions will always be on their side if it comes to court process. Reading all definitions before you sign an insurance paper is a good way of understanding what can work against you once something bad happens.
Insuring Agreement is a collection of all promises between two parties listed in a contract. It contains conditions under which the insurance is paid, exclusions of the rules, services that the insurance company can and will offer in different situations and so on.
Exclusions are listed in every insurance paper and they represent a list of things or occasions that are not covered by that insurance. Some of those exclusions are made due to high probability of loss while other things are excluded because they represent moral hazards in which people may be tempted to create the loss themselves.
Conditions are the mix of all requirements the insured has to do after a loss has happened. Some of those conditions are notification of the insurer, prevention of further losses, inventory of all damaged property listed to the insurer, cooperation and so on.
Endorsements/Riders represent additional modifications to the contract ( which include additions, deletions and similar changes ). These things are not added to every contract, but are used for specific insureds, and therefore they carry more weight than other sections, once a breach of a contract happens.
Others section includes all other things that are not included in previously mentioned sections. This can include everything from grace period to consequences and sanctions for certain breaches in the rules.
Insurance is somewhat interesting but complicated area. But understanding how insurance works is just another step in protection of your capital. For example, through insurance you will learn that games of the chance can’t be insured including banc de binary review type adds and similar gambling sites.
You might not know but originally over-the-counter market was only place where options were traded and in those trades two parties negotiated terms of the contract before sealing it. The advantages of this market over other markets is that those contracts can be tailored ( strike prices can be written down, expiration dates as well ). But two main disadvantages of OTC market over other parkets is the higher costs and lower liquidity. I will exclude binary options from this article, they work in different way, but if you want to learn more about them search for 24option review and read through.
So, option exchanges are now central place of trading these options and they:
- Establish all terms of the contracts that are standardized
- Provide all necessary infrastructure for trading, hardware and software both, due to computerization of the whole trading system
- One centralized system exists and it links together everyone, from investors and brokers to dealers which in return creates best prices, both bid and ask
- Establish all rules and procedures that are allowed in trading on that particular system.
Same trading system works for options as it works for stocks, you buy at ask price and sell on bid price. But to trade options you have to create brokerage account, pay brokerage commissions which include fees for buying options among other fees.
The OCC (Options Clearing Corporation) is an organization that I sa part of every trade. They are middle-man in every transaction, and they ensure fair trading. It is owned by member firms which are all exchanges that trade options. They are responsible for publishing of all news that include the change of trading rights, or adjustments to already existing laws of trade.
Options trading is not just pressing a button and instantly trading that option, well it seems so to the trader. But in fact there is a process that happens once a trader decides to trade an option.
First step in an exercise of the option is when the trader notifies the broker that he is going to do it. It should be at least 24 hours before the exercise happens or there may be problems in the actual trade. Different time frames for this notification exist depending on many things, but in general notification is required.
Once the broker is notified he sends instructions of the exercise to the OCC who then finds their member who is short on that particular position in same option series. After that the member with short position will find a trader with same short position and transfer happens between them. No direct contact between two traders happen at all. Choosing a short or long ( basically a second trader ) is done most commonly in order when they applied for that position, or in some cases through special order stated by the market or someone else in charge. Due to presence of OCC the writer of certain position can buy back his position and it doesn’t affect trading because the OCC has a pool of contracts from which they are drawn.