At a certain point in your personal finance journey you start to realize you’ve moved past basic budgeting and frugality and now have a surplus. But what to do with it? Invest it, right? The thing is, there are so many different ways to invest – from a solid foundation of mutual funds/index funds to slightly more risky individual stocks up to many lots of other higher risk/higher reward categories even up to essentially just gambling. My friend Gene from OneTwoTrade is here today to talk with you about one of those last category options – binary trading. 

Binary options continue to grow in popularity by the day. The more people learn about trading options, the more they consider taking the plunge and trading. Obviously, there’s a lot you should do before putting money into options trading, but there are definitely plenty of benefits to look forward to as well. If you’re sitting on the fence right now, the questions about exotic options you have are probably fairly common. Let’s answer them now.

How Long Does It Take to See Returns?

Assuming you understand what binary options are, one of the most common questions about them concerns when you can expect to see returns from a trade. This is a good question because options have expiration dates, unlike what you’d get when trading a traditional stock. There is no one answer though. The expiration date will depend on the option you invested in. Your option could expire in a month or it could expire in an hour.

Is It Better to Invest in Options With Long or Short Expiration Dates?

As you can imagine, there are pros and cons to long and short expiration dates. However, when you’re just starting out it’s probably best to go with short expiration dates. The reason for doing so is to make as many trades as possible. This will help reduce the learning curve. Just be sure you are only investing a small amount each time until you begin understanding how everything works.

What Kinds of Returns Can I Expect?

Common questions about binary options also tend to focus on returns for good reason. Returns don’t work the same way with options as they do with other types of trading. If you sell a traditional stock after it has doubled in value, you can expect to make back the amount you invested, right? With exotic options, the amount you get back is usually just a percentage of what you invested. It will rarely be 100% and can easily be as low as 65%. While this may seem like a disadvantage, it’s because you have a lot to win by investing in an option that pans out. Likewise, most brokers will mitigate your losses to a large degree, entitling them to a healthy commission.

Are Binary Options Legal?

This is another good question. As they are relatively new and offer so many rewards, it makes sense that people would be skeptical about their potential returns. The good news is that they are perfectly legal in most countries. In most other countries, they’re legal by default, meaning there are no laws regarding them one way or the other. It would be a good idea to look into the laws governing exotic options in your country before trading. You also want to make sure your broker is certified in a country that has laws with respect to options trading.

Hopefully, the above has helped answer your questions about options trading. You’ll probably have plenty of others as time goes on, but for now, take the next step toward becoming a trader.