Many have read about the investment opportunities that Bitcoin is able to offer, but not everyone knows the strategies available. As well as being able to purchase Bitcoin directly, you can also choose binary options, but what are these and how do they work? To better understand how Bitcoin operates within binary options, we first need to look at options trading.
Options trading refers to a contract that allows the investor, but doesn’t obligate them, to sell security on or before a specific date. The security normally refers to a stock, bond or asset that you will either be buying or sell. If you’re looking to purchase a security, then you believe it will rise in price. Similarly, if you looking to see security you already own, then you would do so believing the value of the security will fall.
Binary options are like that of regular options but do operate in a slightly different way. Binary options are also known as fixed-return options and take an all-or-nothing approach to buying or selling a security. The security will have an expiration date, as well as predetermined value of a potential return.
As to whether you make a return depends on whether you decide to make a ‘call’ or ‘put.’ A call is applied if the trader believes the market is rising and will make a profit should the price be higher at the expiration of the contract. Similarly, those applying ‘put’ believe the value will fall and will make a profit should the price be lower at the expiration of the contract.
How Bitcoin Fits In
In comparison to other forms of security, Bitcoin is seen as something of a newcomer. As such, you shouldn’t be surprised to find that not all brokers will be able to offer binary options in relation to the digital currency, but this doesn’t mean there aren’t any brokers who deal with Bitcoin.
Despite it being a new arrival in relation to currency, Bitcoin has managed to become a profitable and popular currency, meaning that a series of brokers have seen the benefits of Bitcoin, and are keen to welcome it as a security for those looking to diversify their investment portfolio. For more information on brokers and cryptocurrency exchanges read this review.
How Popular are Binary Options in Trading?
Despite Bitcoin being a recent in addition to binary options trading, it has proved to be popular with traders. This is often attributed to the limited risk and the small amount that such investments accept. The limited risk is due to the fact that the risk can be calculated beforehand. However, this doesn’t mean that the investment is guaranteed, so we should never spend more than we can afford.
You should also ascertain as to whether trading using binary options is for you. Although investment in Bitcoin is available via brokers, there may be other strategies that are more tailored towards your investment goals. If you’re really not sure where to begin
The Difference Between First-Generation and Second-Generation Brokers
When trying to find a suitable broker that deals with binary options, you will often hear of first-generation and second-generation options. The main difference is that a first-generation broker will allow for the trading of Bitcoin, whereas second-generation brokers offer a mix of Bitcoin funding and trading.
Finding the Right Company in Relation to Binary Options
Like any form of financial trading, you need to ensure you carry out research in relation to which platform you’re going to use in relation to your binary options. While the majority of brokers are reputable and reliable, there will be those who offer a less-than-stellar service and may hold back on some of the finer details.
For example, you should be checking to ensure that stored within deep cold storage, as this gives more security due to the Bitcoins being stored offline. While there are many security protocols in place, it’s always worth ensuring that your investment is as safe as possible. The following is an example of some of the platforms available to give you an idea, but only you can find the most suitable platform, as you will need to consider several factors, such as the ease of use of the platform, and how much a particular broker charges in commission.
First Generation Brokers
- Coin Ultimate Trading
- 24 Options
- BTC Levels
Second Generation Brokers
- Bitcoin Wisdom
Other Factors to Consider
Now you know how binary options work with Bitcoin, and what kind of solution are available, you’re primed to make your first investment. However, you shouldn’t be too hasty. It can be worthwhile following trends and updates in relation to Bitcoin to ensure that you’re able to limit any potential loss.
It’s important to stay grounded when making investments. A couple of good runs could mean that you’re tempted to make larger investments moving forward, but its still important to only invest what you can afford to lose, as no one really knows what tomorrow will bring. If you’re in any doubt as to whether binary options fit in with your current financial planning, it can be advisable to speak to a professional.
If you’re still a little wary or you’re not too sure how the platforms work, then it’s advisable that you look for a broker that is able to offer a demo account. This often emulates the main platform but does not put your capital at risk. As such, you can invest using dummy money, although any return will be not be paid out, as there was in money invested in the first instance.