Digital Security For Binary Options Traders

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Digital Security For Binary Options Traders

Internet Security For Binary Options Traders

It is all too easy for new and old traders alike to become obsessed with charts, indicators, strategies, signals and profits. Along the way, even before you get started, it is wise to address security issues so no unwanted intrusions or loss of data interrupt a great trading session. The bottom line is that Internet security is a serious business, and even more serious when considering your binary options account.

  1. The number one thing to remember is that the security of your system, your connections and your trading is your responsibility. While it is in their best interest, and usually legally appropriate, for a broker to have top notch digital security it is not their responsibility to protect you from anything other than frauds they themselves may commit. That leaves an unlimited number of potential threats for you to be concerned with.
  2. When connecting to your broker enable the firewall protection on your computer or another firewall application of your choice. This will help stop hacking attempts from outside/third-party sources and help to keep your personal devices and information safe.
  3. Use/Install anti-virus, mal-ware and spyware software. This will help keep your computer free of viruses and unwanted spyware that may be installed without your knowledge. While it is unlikely that a broker will seek to install malware on your device your connection with the broker, or worse a shady signal provider or robot, are prime targets for black hat hackers.
  4. Keep your passwords safe. Absolutely do not under any circumstance use the same old password you use everywhere else. Come on, seriously, we know this to be important already because if one account is compromised then ALL your accounts can be compromised. At the same time keep your log-in details and passwords safe by storing them out of reach of others. You definitely do not want anyone else trading your account.
  5. Using a credit card for the initial deposit is often a good idea. They offer additional protections for consumers that you just can’t get anywhere else. These include fraud protections and the ability to “charge-back” the broker and recover funds. Many online eWallets such as PayPal and Skrill offer credit/debit cards for use with their accounts and come with such protections.
  6. Privacy is an important part of your online security. You want to be sure to read the terms and conditions of any broker, signal service, robot or autotrader you use to see how it is they handle information. Look out for and avoid websites that may share your information with third-parties.
  7. Binary options regulation is a big step toward ensuring a safe trading experience. However, don’t believe everything you read on the brokers website, too many brokers are claiming to be regulated when they aren’t. These fall into two categories, brokers claiming to be regulated by a known regulator, and brokers who make up a regulator and claim to be regulated by them. In either case a quick check of the regulators website should clear up any questions. If more questions are raised avoid both the broker and the regulator.
  8. The final step in any Internet security scheme is to use a VPN. A VPN, virtual private network, is a method of connecting to the internet that ensures privacy and safety. The VPN creates a digital tunnel through which your devices connect to the internet and websites without anyone else knowing about it. This connection uses an anonymous IP, is invisible to hackers and malware and, even if they could find it, would not be readable because of encryption. How to use a VPN you might ask? Well, it’s super easy. Top providers like Le VPN make connecting very simple for all levels of Internet users, all you have to do is register, install the software and connect.

Digital Security For Binary Options Traders

It is all too easy for new and old traders alike to become obsessed with charts, indicators, strategies, signals and profits. Along the way, even before you get started, it is wise to address security issues so no unwanted intrusions or loss of data interrupt a great trading session. The bottom line is that Internet security is a serious business, and even more serious when considering your binary options account.

  1. The number one thing to remember is that the security of your system, your connections and your trading is your responsibility. While it is in their best interest, and usually legally appropriate, for a broker to have top notch digital security it is not their responsibility to protect you from anything other than frauds they themselves may commit. That leaves an unlimited number of potential threats for you to be concerned with.
  2. When connecting to your broker enable the firewall protection on your computer or another firewall application of your choice. This will help stop hacking attempts from outside/third-party sources and help to keep your personal devices and information safe.
  3. Use/Install anti-virus, mal-ware and spyware software. This will help keep your computer free of viruses and unwanted spyware that may be installed without your knowledge. While it is unlikely that a broker will seek to install malware on your device your connection with the broker, or worse a shady signal provider or robot, are prime targets for black hat hackers.
  4. Keep your passwords safe. Absolutely do not under any circumstance use the same old password you use everywhere else. Come on, seriously, we know this to be important already because if one account is compromised then ALL your accounts can be compromised. At the same time keep your log-in details and passwords safe by storing them out of reach of others. You definitely do not want anyone else trading your account.
  5. Using a credit card for the initial deposit is often a good idea. They offer additional protections for consumers that you just can’t get anywhere else. These include fraud protections and the ability to “charge-back” the broker and recover funds. Many online eWallets such as PayPal and Skrill offer credit/debit cards for use with their accounts and come with such protections.
  6. Privacy is an important part of your online security. You want to be sure to read the terms and conditions of any broker, signal service, robot or autotrader you use to see how it is they handle information. Look out for and avoid websites that may share your information with third-parties.
  7. Binary options regulation is a big step toward ensuring a safe trading experience. However, don’t believe everything you read on the brokers website, too many brokers are claiming to be regulated when they aren’t. These fall into two categories, brokers claiming to be regulated by a known regulator, and brokers who make up a regulator and claim to be regulated by them. In either case a quick check of the regulators website should clear up any questions. If more questions are raised avoid both the broker and the regulator.
  8. The final step in any Internet security scheme is to use a VPN. A VPN, virtual private network, is a method of connecting to the internet that ensures privacy and safety. The VPN creates a digital tunnel through which your devices connect to the internet and websites without anyone else knowing about it. This connection uses an anonymous IP, is invisible to hackers and malware and, even if they could find it, would not be readable because of encryption. How to use a VPN you might ask? Well, it’s super easy. Top providers like Le VPN make connecting very simple for all levels of Internet users, all you have to do is register, install the software and connect.

Digital Option

What Is a Digital Option?

A digital option is a type of options contract that has a fixed payout if the underlying asset moves past the predetermined threshold or strike price. There’s an upfront fee called the premium for digital options, which is the maximum loss for the option.

Unlike traditional options, digital options don’t convert or exercise to the underlying asset’s shares. Instead, they pay out a fixed reward if the asset’s price is above or below the option’s strike price. Digital options are also referred to as a “binary” or “all-or-nothing options.”

Options Explained

Options are financial derivatives, so they receive their value from an underlying asset or security. Traditional options give buyers the ability, though not the obligation, to transact in the underlying security at a predetermined price—called the strike price—by date of expiration—or the end date of the contract.

Options have a premium attached to them, meaning they have an upfront fee. The premium can fluctuate over time and vary from option-to-option based on the value of the underlying security, how close the option is to its expiration, the strike price, and the level of demand for the option in the market.

The value of the premium can also provide insight as to value investors place on the option and the underlying security. An option that has value will likely have a higher premium than an option that is unlikely to make a profit by its expiry date. Options are available for many securities including equities, currencies such as the euro, and commodities such as crude oil, corn, and natural gas.

Best Binary Options Brokers: 2020 Ranking
  • Binarium
    Binarium

    Best Choice! The leader in our ranking!
    Perfect for beginners!
    Free Demo Acc + Free Trading Education!

  • Binomo
    Binomo

    Good choice for experienced traders!

Key Takeaways

  • Digital options are a type of options contract that has a fixed payout if the underlying asset moves past the predetermined threshold or strike price.
  • The upfront fee called the premium is the maximum loss for digital options.
  • Unlike traditional options, digital options don’t convert or exercise to the shares of the underlying asset.

Unique Features of Digital Options

Digital options are different from traditional options in that they don’t transfer ownership of shares when exercised or at their expiration date. Instead, digital options pay out the fixed amount to the investor if the price of the underlying security is above or below the strike of the option at expiry. The value of the payout is determined at the onset of the contract and doesn’t depend on the magnitude by which the price of the underlying moves.

If the underlying asset expires in-the-money, meaning the option is profitable, the option is automatically paid out with the trader receiving the profit. If the option expires out-of-the-money meaning it’s not profitable, the investor’s maximum loss is limited to the upfront premium regardless of the underlying’s price movements.

A digital option is merely a gamble or a bet that the price of the underlying asset will be above or below the strike price at a certain time and date. If an investor believes the price of the underlying will be above the strike, the option will be purchased. Conversely, if an investor believes the underlying’s price will be below the strike, the option will be sold.

Listing and Regulation of Digital Options

Unlike vanilla options, selling a digital option does not mean the trader is writing an option, which involves the seller or writer being paid a fee for allowing the buyer to exercise the option. In most cases, investors who sell traditional options use them as an income strategy and hope the option will not be exercised so they can keep the premium.

Selling a digital option is equivalent to buying a put option whereby the investor expects the underlying to be below the strike price at expiry. Some digital options brokers break up these options into calls and puts, whereas others have only one option where traders can buy or sell—depending on which direction they expect the price will go.

Call options are bought when the price of the underlying is expected to rise. Put options are bought when the underlying’s price is expected to fall.

Digital options may appear to be similar to standard options contracts, but they may be traded on unregulated platforms. As a result, digital options can carry a higher risk of fraudulent activity. Investors who wish to trade digital options should use platforms that are regulated by the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC).

Nadex is a regulated digital options broker in the U.S. The platform provides strike prices and expirations for various underlying assets. All options have a value of $100 or $0 at expiry. The maximum payout is $100, and the premium varies depending on the strike and the price of the underlying security. So, if a premium is $50, the maximum payout is also $50 because each contract’s maximum value is $100. If the premium is $30, the maximum payout is $70 for that option.

Traders buy the option if they think the price of the underlying will be above the strike at expiration. If they think the underlying will be below the strike, they sell the option.

Digital options pay a fixed amount if the underlying asset moves past the predetermined threshold or strike price.

The maximum loss for digital options is limited to the upfront fee or premium.

Unlike traditional options, digital options don’t convert or exercise to the underlying asset’s shares.

Digital option’s profits are limited to the fixed payout.

Digital options can be risky if traded on unregulated platforms.

Investors miss out on price gains after expiry since there’s no ownership of the underlying security.

Real World Example of a Bullish Digital Option

Let’s say the Standard & Poor’s 500 Index (S&P 500) is trading at 2,795 June 2. An investor believes the S&P 500 will trade above 2,800 before the end of the trading day June 4. The trader purchases 10 S&P 500 options at a strike price of 2,800 options for $40 per contract.

Scenario 1:

The S&P 500 closes above 2,800 at the end of the trading day, June 4. The investor is paid $100 per contract, which is a profit of $60 per contract or $600 (($100 – $40) x 10 contracts).

Scenario 2:

The S&P 500 closes below 2,800 June 4. The investor loses all of the premium amount or $400 ($40 x 10 contracts).

Real World Example of a Bearish Digital Option

Let’s say gold is currently trading at $1,251, and an investor believes the price of gold will decline and close below $1,250 by the end of the day.

The investor sells a digital option for gold at a $1,250 strike price with expiry at the end of the day and will be paid $65 at expiry if correct. Since each of these digital options have a maximum value of $100, the premium paid in the event of a loss will be $35 or ($100 – $65).

Scenario 1:

Gold’s price falls and is trading at $1,150 by the end of the day. The investor is paid $65 for the option.

Scenario 2:

The investor is wrong, and gold’s price surges to $1,300 by the end of the day. The investor loses $35 or ($100 – $65 = $35).

It’s important to note that Nadex digital options allow traders to exit some positions before expiry for partial losses or partial profits depending on where the underlying is trading. However, there needs to be enough buyers and seller available. In other words, the liquidity—buying and selling interest—needs to be present to unwind an option position before expiry.

Best Binary Options Brokers: 2020 Ranking
  • Binarium
    Binarium

    Best Choice! The leader in our ranking!
    Perfect for beginners!
    Free Demo Acc + Free Trading Education!

  • Binomo
    Binomo

    Good choice for experienced traders!

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