There are times when even the most experienced trader confuses traditional options with binary options or vice-versa. There are differences between these two despite being both traded on futures markets.

What are binary options?

A binary option’s payout is a fixed amount of a purchased asset or nothing. There are two types of binary options which are asset or nothing or cash or nothing option. The cash or nothing option pays a determined amount of cash, on the other hand the asset or nothing option pays out the value of the security bought. There are only two outcomes when it comes to the binary options market. In the binary options market, the return it provides traders is already determined before a purchase is done.

What are traditional options?

Traditional options are non-transferable and must be used on certain dates. To make a profit, the owner of the assets must buy them and sell the same assets on the trading market. Traditional options have leverage and margin qualifications that need to be met.

The Differences Between Traditional & Binary Options

Margin and Leverage Requirements

Traditional options have their own margin and leverage requirements that need to be followed. A highly leveraged market characterizes traditional options. Because of the margins offered by a broker, a trader has leverage wherein they can obtain positions that are larger than the trader’s capital. The margin is a type of loan facility offered by a broker to allow a trader to hold a higher position that his or her capital can offer. This trading option requires equity contribution from the trader so he or she can facilitate a trade. Binary options on the other hand have no such leverage. A trader in binary options is restricted by his or her own funds with no margin facilities from a broker.

Contract Requirements

Binary options are measured in terms of the money invested into the market and trade and not by assets bought. On the other hand, traditional options can buy one contract which is tantamount to 100 units of an asset used for the trade.

Costs of the Trade

Traditional options are more expensive than their binary options counterpart because traditional options have margin and leverage margin qualifications, and also have minimum contracts that need to be bought. On the other hand, binary options can start with a cost of only $25. The low cost of the market cannot be replicated in the traditional options market because of the strict margin and leverage qualifications.

Capital Qualifications

There is a huge difference between the capital requirements for traditional and binary options. In the binary options market, you can start with a capital of as low as $100 because there is no leverage or margins requirement. On the other hand, traditional options markets have minimum leverage qualifications of at least 1:50. A typical traditional options market needs $10,000 in capital to handle the conditions of a traditional options market.

Payouts

There are also distinct differences between the payouts of traditional and binary options markets. Payouts in the binary options markets are fixed and are determined before a trading position is opened. On the other hand, traditional options markets have varied payouts based on the movement of the asset purchased. The payouts vary and are unknown until the end of the trade.

One can see the differences between traditional options and binary options markets. These differences will help you decide on which market to enter and invest in. There are pros and cons in investing in traditional and binary options markets. The differences will provide future traders with the information they need to invest prudently. As a trader you can choose between the two and use them accordingly.

Informative sources :
CBOE

If you are new to investing, a lot of people would advise you to get started by opening a brokerage account. However, the first thing that you should know is how much money you should put aside to get you started with this investment account.

How to Get Started

Some people would normally rely on brokers to do all their investment deals for them. However, not all starting investors can actually pay for commissions. Or at the very least, not all people are willing to spare money to pay for a middleman. This makes sense, since it is not necessary to put up a personal policy to pay someone else that you should be spending for yourself.

If you don’t have a lot of money, a great way to get started is to go to an online brokerage site that will get you started up with your account. Initially, all you have to do is fill up some forms telling the company about yourself, link the account to your money account, and fill it up with funds later.

The Money Part

Once you have decided to open up an account, here comes the issue of monthly fees and minimum balances. Some brokerage accounts would require you to have $1000 minimum balance. To many starting investors, that is a lot of money. If you are opening up an online account, Betterment offers a minimum of only $100 a month charge, without having to maintain a minimum balance; to get more details how Betterment works and what they charge you should read this review from BestRatesIn and see if they suit your investing needs. If you are reluctant, they throw in a free 30 day trial for your account, and if you still like them after a month, that’s the only time they will begin automatic charges to your bank.

Good brokerage firms face that a lot of those who want to make money out of investing do not have an idea how much they should step aside. Etrade is laudable for putting up a page in their website that allows its users to fill it up with information such as the spare money that they have and how much time they have to wait. Etrade also extends help to their users by getting the information about their trading experience and what are they going to spend the money for. Essentially, once you go to their site, they will offer a step-by-step scenario based on the information you give them, making your experience a customized brokerage account according to your needs. They would require a minimum of $500 for you to invest. Read their review at BestRatesIn.com.

If you are going to get started with a brokerage account, it is important that you have an income that can support automatic charges. A lot of automatic monthly charges to your banks may be relatively small if you have an online brokerage account, but they may pile up on top of other fees that you are already paying, such as credit card fees and utility bills.

Online Brokers That You Will Want to Look At

Trademonster is one of the popular names in the field of online trading, and according to reviews, they are aimed to change the face of trading. They allow you to sell mutual funds for free, and they throw in no-fee IRAs. However, if you are looking to experience their way of trading and get a hold of their trade education tools and their trading services, they require $2000 minimum balance.

Your better option, as it seems, is Tradeking. Tradeking offers similar services, and people love them because they do not require any minimum balance to join. They also offer service rates. Yes, if you are ever going to want a broker to help you, get one that will not charge you with hidden fees. If you should ever get charged, opt to pay for the lesser cost. However, you cannot partner with international investors on your account, and you have to go through shorter after-hours trading time if you go with them. Read the detailed review from BestRatesIn.com.

Mobility

Another thing that costs money when you get started on investing is transportation, and essentially, your need to be present if you should ever want to make a trade. Historically, that is what brokers are for. Because trading eats up time, brokers provide you a number of reasons why you need to keep their commissions in mind when you open up an investment account.

Thanks to technology, trading for your choice of products is made more efficient, and you can actually make a trade wherever you are. Optionsxpress makes up for this experience, thanks to their intuitive mobile app that allows you to trade for your favorite products while on the go. At the same time, those who do not have time to attend seminars on how to boost their trading knowledge can use their all-in-one platform for added education. They do not have a minimum balance required to open an account, but they strongly suggest that you should have enough money to get started with trading. You would really want to know more about OptionsXpress, here is BestRatesIn’s informative review.