Emerging Theories on Binary Options Trading and Market Bubble Risk

Best Binary Options Brokers 2020:
  • Binarium

    Best Binary Options Broker 2020!
    Good Choice for Beginners!
    Free Trading Education, Free Demo Account!
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  • Binomo

    2nd in our ranking!

Binary Options Gamification Trading Product: Bubbles

New innovative Binary Option Trading Product: Bubbles by anyoption.

Towards the gamification of Trading Binary Options.
Written by Thomas A. Wright with tradersdna team

The trading industry is in advanced state of development with new innovation just coming everyday. Moreover trading has an implicit risk and some traders are somehow big risk takers. Although the art of trading is something that implies the adrenaline of looking at markets and find the best spot between the margin of profit, winning and the relative implicit risk management. A good trader has to manage both sides of the equation.

As digital and tech new innovation comes to trading, special with social trading and copy trading there is a macro trend of integrating two completely different fields to find a comprehensive solution to the trading art and how to solve the problem of risk reward and having an excitement in the trading process. As scientists and researchers have been experimented gamification brings a new possibility to trading. In general any activty that integrates gamification tends to have more engagement and positive results. Now, some trading houses are taking this gamification process to the next level. It might look odd to some of us but gamification and online trading integration is on its way and makes completely sense as technology allows to leverage different kinds of engagement.

Gamification of Trading.

Gamification trading is a technique which applies game elements and mechanics on real-world situations in trading. This emerging field has been able to capture the attention of many businesses and some brokers because it produces the desired results in less time by engaging a targeted audience to participate in the case a trader in the process of trading.

Online Trading Gamification.

The trading of securities online has become the norm after wider adoption and acceptance of internet and has been adopting of course multiple principles of social media and game theory. The popularity of online trading has been on the rise as suggested by statistics and the trend is going to continue in the same fashion as retail trading becomes more and more a way for any person to manage his savings or find new ways of using its assets. Many new traders are also entering the market regularly and most of the millennium generation are game players. Therefore the fact that gamification arrives to trading is part of this social and tech evolution.

Gamification and Online trading Integration

Best Binary Options Brokers 2020:
  • Binarium

    Best Binary Options Broker 2020!
    Good Choice for Beginners!
    Free Trading Education, Free Demo Account!
    Get a Sign-Up Bonus Now!

  • Binomo

    2nd in our ranking!

The key for a successful trading is stay in the game for a long time. Fast track the process and improve skills as in a high performance sports game.

As many brokers explore gamification of trading some efforts are underway with positive results that have also been achieved special in engagement and simplifying the high complex process of trading. This simplification and visualisation of markets and trends will further speed up the process of gamification of online trading.

And being very precise a lot of traders that have experienced hang out in chat rooms and forums to keep themselves updated and the ones using the booming platforms of social trading, MT4 adviser algos, and special copy trading are partly already using some principles of gamification. New traders, who want up to date information but do not know where to look for it and lack the required knowledge to succeed in online trading, will find gamification useful and a new way to elaborate in trading with new ways of doing it.

Using game elements or developing tools and technologies that could help online traders in their quest to success can play a crucial role. In here social media, algorithm trading are making things easier by sharing the latest news, graphics, trends and articles to help investors make the right decisions. There should be a review and ratings method followed to rate forums which makes it easier for traders to select the best forum to get the knowledge.

Binary Option Product: Bubbles

Trading Binary Options with Gamification Feature Bubbles

Shy Datika, anyoption CEO stated in a recent interview with FinanceMagnates

A great example of anyoption innovation is Bubbles. We are going to introduce a new product that is on the border between gaming and financial trading called bubbles. We are changing binary options from something that is numbers based to something much more visual and fun.

The trading of binary options has emerged in that last years and has evolving in a fast pace with a huge number of companies appearing and strengthening their offer and being now regulated. anyoption is a company that has strengthened that focus investing in resources and special in customer experience. They have a well-read blog which contains expert research, they create courses and invest in more innovative ways to improve the experience of trading. Furthermore they have been investing heavily in regulation.

In trading, a binary option is a type of option in which the payoff can take only two possible outcomes, either some fixed monetary amount or nothing at all (in contrast to ordinary financial options that typically have a continuous spectrum of payoff).

Binary options are derivatives that ordinary people can trade to quickly earn extraordinary returns. A trader speculates on where an asset’s price will go – up or down – within a specific time period. If a trader correctly predicts that gold, for instance, will go up then returns can be rather high at about 80%.

This is not an easy task though. Millions around the world are starting to trade because results are fast with the average trade lasting just ten easy minutes.

It doesn’t take a finance degree or long research, however, to get some clues as to which way an asset is heading. Just skimming the news seems to be enough for most traders to get a handle on what’s likely to occur in the markets.

Binary option trading is simple and somehow exciting to begin with but anyoption.com – the first and one of the largest binary companies – has been revolutionising the industry by introducing a new gamification way to trade that makes it much more “exciting” and game-like.

Binary option trading Gamification product Bubbles

anyoption innovative gamified binary option product ‘Bubbles’

anyoption calls their innovative gamified binary option product ‘Bubbles’ and it’s likely to transform the industry and the way retail traders trade options.

Unlike most binary option products, “Bubbles” plays like a high-octane “gambling” game with all of the anticipation and excitement that goes with it. Traders simply choose an asset and amount they want to invest. Then traders use their mouse to adjust a circular bubble to determine its size and shape.

The bubble created by the Trader is then placed where it’s believed that the asset’s price will go. If the asset’s price intersects with the bubble at any time the trader wins.

The profit percentage decreases the bigger the bubble is made. And if the bubble is placed far from the likely trajectory of the trend-line – the profit percentage dramatically increases – going higher than 1000% at times. These phenomenal returns far outstrip what’s possible with the usual binary option products.

This gamified product is already attracting many traders interested in investing and making their trading and investing money work for them but who also want to experience the gamification, amusement and exhilaration they may find playing with markets.

The big difference between gamification and trading options, of course, is that anyoption is fully regulated by CySEC plus individual EU states and is based on actual market fluctuations. While global markets are going wild and investing may seem prohibitive – the fact is that the more volatile an asset’s price is – the more potential there is for serious trading value creation.

Of course it is important to underline that although Bubbles is an innovative way to improve trading experience any trader needs to consider that before deciding whether or not to take part in financial markets or any other type of financial instrument trading, must carefully consider their investment objectives, level of experience and risk appetite.

Binary option trading Gamification product Bubbles

tradersdna is a new digital source for retail and institutional Forex traders, industry leaders and capital market players offering useful resources, research, the latest breaking information, news, Forex PR, and receive an in-depth analysis of latest events.

A Guide to Trading Binary Options in the U.S.

Binary options are financial options that come with one of two payoff options: a fixed amount or nothing at all. That’s why they’re called binary options—because there is no other settlement possible. The premise behind a binary option is a simple yes or no proposition: Will an underlying asset be above a certain price at a certain time?

Traders place trades based on whether they believe the answer is yes or no, making it one of the simplest financial assets to trade. This simplicity has resulted in broad appeal among traders and newcomers to the financial markets. As simple as it may seem, traders should fully understand how binary options work, what markets and time frames they can trade with binary options, advantages, and disadvantages of these products, and which companies are legally authorized to provide binary options to U.S. residents.

Binary options traded outside the U.S. are typically structured differently than binaries available on U.S. exchanges. When considering speculating or hedging, binary options are an alternative—but only if the trader fully understands the two potential outcomes of these exotic options.

Now that you know some of the basics, read on to find out more about binary options, how they operate, and how you can trade them in the United States.

U.S. Binary Options Explained

Binary options provide a way to trade markets with capped risk and capped profit potential, based on a yes or no proposition.

Let’s take the following question as an example: Will the price of gold be above $1,250 at 1:30 p.m. today?

If you believe it will be, you buy the binary option. If you think gold will be below $1,250 at 1:30 p.m., then you sell this binary option. The price of a binary option is always between $0 and $100, and just like other financial markets, there is a bid and ask price.

The above binary may be trading at $42.50 (bid) and $44.50 (offer) at 1 p.m. If you buy the binary option right then, you will pay $44.50. If you decide to sell right then, you’ll sell at $42.50.

Let’s assume you decide to buy at $44.50. If at 1:30 p.m. the price of gold is above $1,250, your option expires and it becomes worth $100. You make a profit of $100—$44.50 = $55.50 (minus fees). This is called being in the money. But if the price of gold is below $1,250 at 1:30 p.m., the option expires at $0. Therefore you lose the $44.50 invested. This called out of the money.

The bid and offer fluctuate until the option expires. You can close your position at any time before expiry to lock in a profit or a reduce a loss, compared to letting it expire out of the money.

A Zero-Sum Game

Eventually, every option settles at $100 or $0—$100 if the binary option proposition is true and $0 if it turns out to be false. Thus, each binary option has a total value potential of $100, and it is a zero-sum game—what you make, someone else loses, and what you lose, someone else makes.

Each trader must put up the capital for their side of the trade. In the examples above, you purchased an option at $44.50, and someone sold you that option. Your maximum risk is $44.50 if the option settles at $0, and so the trade costs you $44.50. The person who sold to you has a maximum risk of $55.50 if the option settles at $100—$100 – $44.50 = $55.50.

A trader may purchase multiple contracts if desired. Here’s another example:

  • NASDAQ US Tech 100 index > $3,784 (11 a.m.).

The current bid and offer are $74.00 and $80.00, respectively. If you think the index will be above $3,784 at 11 a.m., you buy the binary option at $80, or place a bid at a lower price and hope someone sells to you at that price. If you think the index will be below $3,784 at that time, you sell at $74.00, or place an offer above that price and hope someone buys it from you.

You decide to sell at $74.00, believing the index is going to fall below $3,784 (called the strike price) by 11 a.m. And if you really like the trade, you can sell (or buy) multiple contracts.

Figure 1 shows a trade to sell five contracts (size) at $74.00. The Nadex platform automatically calculates your maximum loss and gain when you create an order, called a ticket.

Nadex Trade Ticket with Max Profit and Max Loss (Figure 1)

What You Need To Know About Binary Options Outside the U.S

Binary options let traders profit from price fluctuations in multiple global markets but it’s important to understand the risks and rewards of these controversial and often-misunderstood financial instruments. Binary options bear little resemblance to traditional options, featuring different payouts, fees, and risks, as well as a unique liquidity structure and investment process.

Binary options traded outside the U.S. are also structured differently than those available on U.S. exchanges. They offer a viable alternative when speculating or hedging but only if the trader fully understands the two potential and opposing outcomes. The Financial Industry Regulatory Authority (FINRA) summed up regulator skepticism about these exotic instruments, advising investors “to be particularly wary of non-U.S. companies that offer binary options trading platforms. These include trading applications with names that often imply an easy path to riches.” 

What Are Binary Options?

Binary options are deceptively simple to understand, making them a popular choice for low-skilled traders. The most commonly traded instrument is a high-low or fixed-return option that provides access to stocks, indices, commodities and foreign exchange. These options have a clearly stated expiration date, time and strike price. If a trader wagers correctly on the market’s direction and price at the time of expiration, he or she is paid a fixed return regardless of how much the instrument has moved since the transaction, while an incorrect wager loses the original investment.

The binary options trader buys a call when bullish on a stock, index, commodity or currency pair, or a put on those instruments when bearish. For a call to make money, the market must trade above the strike price at the expiration time. For a put to make money, the market must trade below the strike price at the expiration time. The strike price, expiration date, payout, and risk are disclosed by the broker when the trade is first established. For most high-low binary options traded outside the U.S., the strike price is the current price or rate of the underlying financial product. Therefore, the trader is wagering whether the price on the expiration date will be higher or lower than the current price.

Binary Options Outside the US

Foreign Versus U.S. Binary Options

Non-U.S. binary options typically have a fixed payout and risk, and are offered by individual brokers rather than directly on an exchange. These brokers profit on the difference between what they pay out on winning trades and what they collect on losing trades. While there are exceptions, these instruments are supposed to be held until expiration in an “all or nothing” payout structure. Foreign brokers are not legally allowed to solicit U.S. residents unless registered with a U.S. regulatory body such as the Securities and Exchange Commission (SEC) or Commodities Futures Trading Commission (CFTC).

The Chicago Board Options Exchange (CBOE) began listing binary options for U.S. residents in 2008.   The SEC regulates the CBOE, which offers investors increased protection compared to over-the-counter markets. Chicago-based Nadex also runs a binary options exchange for U.S. residents, subject to oversight by the CFTC. These options can be traded at any time, with the rate fluctuating between one and 100, based on the current probability of the position finishing in or out of the money. There is full transparency at all times and the trader can take the profit or loss they see on their screen prior to expiration. They can also enter as the rate fluctuates, taking advantage of varying risk-to-reward scenarios, or hold until expiration and close the position with the maximum gain or loss documented at the time of entry. Each trade requires a willing buyer and seller because U.S. binary options trade through an exchange, which makes money through a fee that matches counter-parties.

High-Low Binary Option Example

Your analysis indicates the Standard & Poor’s 500 index will rally for the rest of the trading day and you to buy an index call option. It’s currently trading at 1,800 so you’re wagering the index’s price at expiration will be above that number. Since binary options are available for many time frames—from minutes to months away—you choose an expiration time or date that supports your analysis. You choose an option that expires in 30 minutes, paying out 70% plus your original stake if the S&P 500 is above 1,800 at that time or you lose the entire stake if the S&P 500 is below 1,800. Minimum and maximum investments vary from broker to broker.

Say you invest $100 in the call that expires in 30 minutes. The S&P 500 price at expiration determines whether you make or lose money. The price at expiration may be the last quoted price, or the (bid + ask)/2. Each binary options broker outlines their own expiration price rules. In this case, assume the last quote on the S&P 500 before expiration was 1,802. Therefore, you make a $70 profit (or 70% of $100) and maintain your original $100 investment. If the price finished below 1,800, you would lose your original $100 investment. If the price expires exactly on the strike price, it is common for the trader to receive her/his money back with no profit or loss, although brokers may have different rules. The profit and/or original investment is automatically added to the trader’s account when the position is closed.

Other Types of Binary Options

The example above is for a typical high-low binary option—the most common type of binary option—outside the U.S. International brokers will typically offer several other types of binaries as well. These include “one-touch” options, where the traded instrument needs to touch the strike price just once before expiration to make money. There is a target above and below the current price, so traders can pick which target they believe will be hit before the expiration date/time. Meanwhile, a “range” binary option allows traders to select a price range the asset will trade within until expiration. A payout is received if price stays within the range, while the investment is lost if it exits the range.

As competition in the binary options space heats up, brokers are offering additional products that boast 50% to 500% payouts. While product structures and requirements may change, risk and reward is always known at the trade’s outset, allowing the trader to potentially make more on a position than they lose. Of course, an option offering a 500% payout will be structured in such a way that the probability of winning the payout is very low.

Unlike their U.S. counterparts, some foreign brokers allow traders to exit positions before expiration, but most do not. Exiting a trade before expiration typically results in a lower payout (specified by broker) or small loss, but the trader won’t lose his or her entire investment.

The Upside and Downside

Risk and reward are known in advance, offering a major advantage. There are only two outcomes: Win a fixed amount or lose a fixed amount, and there are generally no commissions or fees. They’re simple to use and there’s only one decision to make: Is the underlying asset going up or down? In addition, there are also no liquidity concerns because the trader doesn’t own the underlying asset and brokers can offer innumerable strike prices and expiration times/dates, which is an attractive feature. The trader can also access multiple asset classes anytime a market is open somewhere in the world.

On the downside, the reward is always less than the risk when playing high-low binary options. As a result, the trader must be right a high percentage of the time to cover inevitable losses. While payout and risk will fluctuate from broker to broker and instrument to instrument, one thing remains constant: Losing trades will cost the trader more than she/he can make on winning trades. Other types of binary options may provide payouts where the reward is potentially greater than the risk but the percentage of winning trades will be lower.

Best Binary Options Brokers 2020:
  • Binarium

    Best Binary Options Broker 2020!
    Good Choice for Beginners!
    Free Trading Education, Free Demo Account!
    Get a Sign-Up Bonus Now!

  • Binomo

    2nd in our ranking!

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