Option Trading Tutorial for Investors with Minimal Capital

Published: 16th September 2009
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This option trading tutorial is dedicated to those investors just starting out who have limited means to get started trading an making a decent living off of the stock market. It took me a long time to pile up the scratch necessary to begin trading options but I've found a shortcut that will help you avoid the same wait.

Introducing the Simplest High Return Option Around

Any option trading tutorial would be incomplete if it didn't mention a simplistic form of options trading called binary options trading. Not too many investors know about this form of investment but it is a very hot market right now for people not willing to be stuck with long holding period investments such as stocks, bonds, mutual funds, traditional option contracts and futures. You may look on the web for another option trading tutorial if you want to know about the more common form of contracts trading. This option trading tutorial will focus only on binary option trading.

Binary Contracts Simplify Choices and Outcomes

Binary contracts are, like the name implies, bi-polar. Either you choose the "up" side of the switch, or the "down" side. You might think of it similar to any two-sided choice - yes or no, true or false, heads or tails, on or off. In this case the binary switch refers to up or down movements in a stock, currency, or index.

How it works is that you, or I, or any investor with a binary options trading account picks one of the available securities to trade (not all securities are traded... only the highest volume securities are traded this way) and selects how much to invest.

Small Movements Yield Big Outcomes without Dangerous Leverage

The really fascinating part about this sort of transaction is that it does not matter how much the stock moves... the only thing that matters is the direction. If the binary option trading contract is for a 75% payout on an up movement of a security on a $100 investment and the stock is up even just one cent at the expiration of the option, the investor receives $175 ($100 invested plus $75 profit).

So in summing up this binary option trading tutorial: Trades require the investor to choose only how much to invest, which security, and which direction.

Another options trading tutorial demonstrates how to start binary options trading with only $100, with links to other tutorials, scenarios, and a demonstration video.

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