Binary options are prevalent in the market today since they are simple to understand. This does not, however, mean that you will make profits easily. Unlike in other countries, many foreign binary options brokers are not able to open accounts for residents living in the United States. This means that if you are an American resident and you wish to trade binary option, you can only do so through NADEX options.
North American Derivatives Exchange, commonly known as NADEX allows you to trade binary options on a wide range of markets. It has become the only option for binary options traders in the US. Below is a guide on how to trade on this platform.
Trading binary options in the United States
NADEX trading is based on time elements whereby you wager on whether or not the market will go up or below the given strike price and the duration in which that takes place. It’s that simple. For instance, given the question, will the price of a 1.0-carat diamond be above $ 4,500 (strike price) at 6.00 PM today (expiry)? If your answer is yes (known as buying the option), and it happens to be true and given that the option is trading at $50, you will win $100 minus the commission. If the market value goes down, you will have lost the $100 plus the commission.
Just as the name suggests, you can only win it all or lose your entire stake when dealing with binary options. That means you can either win $0 or $100 depending on whether the market went up or below the set price at the time the option expires. Remember however that you cannot win or lose more than your wager.
What’s more, you can choose to close your position at any given time up until expiry and at whichever price available. If you are confident with your choice, you can maintain your position until expiry upon which you will be rewarded $0 or $100 depending on the outcome.
Binary options, comprising of similar questions like the one above include bitcoin, forex, stock indices and news events. These options come in varying expiry dates thus making them ideal for swing traders and day traders.
Maximum profits and loses
Profits and losses incurred vary depending on the difference between the price at expiration of a given option and the price it was valued at when you were buying or selling the option. To help you understand better, observe the two scenarios below:
- Supposing you by an option with expectations that the market value will go above the strike price, then you risk losing or winning your wager price minus $0 at expiry. For instance, assuming you buy an option at a wager of $52, your risk is $52. You stand to make a maximum profit of $48, which is $100 minus your wager.
- Again supposing you sell an option with expectations that the market price will go below the strike price, then your maximum risk will be $100 less your wager. For instance, assuming you sell an option at a wager of $45, your risk is $55, and you stand to make a profit of $45, which is wager price minus $0.
Remember you are allowed to sell or buy several options to increase and minimize your profits and losses respectively.
How much do you need to trade with NADEX Binary Options?
When it comes to NADEX binary options trading, all traders, regardless of whether they are buying or selling options, need to have enough capital in their account to fund their trade. If your maximum risk is $45 for a given trade, then you are required to have at least $45 in your account.
A minimum deposit of $100 is needed to open a NADEX account. You will be charged a trading fee of $0.90 for any given option and the maximum trading fee per trade is $9. Remember, this fee applies whenever you enter or exit a position. Demo accounts are also available on NADEX to help you improve your trading skills for free.
If you are a US resident wishing to get involved in binary options trading, NADEX is the ideal trading platform for you. Unlike many unregulated Binary Option companies, NADEX is regulated, overseen and transparent. It features a wide variety of options, each with a different price.
You do not necessarily have to wait until expiry since you can exit you options at any time up until expiry. Additionally, it charges you reasonable trading fees and no inactivity charges.