Selling education on commodity prices today is a big business. We see infomercials on television and receive emails advertising free trading software and foolproof trading systems. Unfortunately, there are many "snake oil salesmen" operating in options education. They are busy selling the dream of instantaneous riches without effort - and their price tag isn't cheap.
One consequence of that fact is: as time passes, the price of the option itself can change (the contracts are traded just like stocks or bonds). How much they change is influenced by both the price of the underlying stock and the amount of time left on the option.
The reason that options trading has attracted the reputation of being super risky is that many traders, driven by pure greed, have tried to achieve maximum returns in the minimum time. Insanely huge profits are definitely possible, but when managed with a greed motive, crash-and-burns are inevitable. The key to successful option trading is to "own" a strategy, to know it intimately, and to use it consistently and with clearly defined trading rules.
How did high stake professional poker players make a profession and a living out of a "Gambling" game? The real secret is risk management. Risk management is what takes options trading out of the realm of gambling into the realm of investing.
Binary options is a contract which offers buyers a right to buy but not the obligation, to buy an underlying asset before expiration date and time of the trade. The items being traded are called underlying assets and they could be a variety of products. The flat price, at which the trader buys or sells at, is known as the strike price.
What most traders do is buy cheap at the money options away from their strike price with little time to expiry - this is simply most times going to lose you money - The option is cheap for a reason! The problem of course is time decay eats these options up quickly and the trader losses money.
Math wise it looks like this using a $50 stock price. 5% of $50 is $2.50. Therefore your stop-loss number would be $47.50 (50 - 2.50). If the stock price slides to $47.50, you would execute your trade and exit your position with profit in hand.
If you are a stock owner or new to the world of trading options, it is suggested that you try your knowledge at binary trading options. Before taking your step in trading binary options it is advised to take suggestions of experienced brokers who have advance knowledge and can help you make a profit. Choosing the right binary options expert is a difficult task, hence you need to compare their service, testimony and level of customer support through phone, email or chat.