Back in 2008, digital options were made legal in the United States. The same has happened all over the world, too. Since that time, digital option trading has exploded in popularity for a number of reasons. Whether you’ve recently heard about digital options or are simply curious about a new way to make money, we’re going to provide you with an introduction here.
What Are Digital Options?
In simplest terms, trading digital options means you pick an asset and then try to figure out where its price will go by a certain time. For example, let’s say you have reason to believe that gold will hit $1,500 by the end of the month. You’d find a digital option that represents this assertion (that gold will be at or above that amount by the date you estimated) and then find someone who thinks the opposite and, thus, buy the option from them.
If the date comes to pass and you were wrong, then you lose your money. Depending on your broker, they may absorb some of it. Otherwise, if you win, a predetermined percentage of your investment amount will be paid back.
So You Don’t Get the Amount You Invested?
Correct. How much your return is worth will depend on the option you buy. Still, investing in digital options can provide massive returns over time because the events that reward you are, generally, much easier to predict and the timeframes are much quicker than stocks, bonds, commodities, etc.
Again, in the above example, you only had to wait 30 days. You could have also bought a contract for an option that lasts 24 hours or even less. Given the possibilities, you don’t need 100% paybacks to amass big profits in a short period of time.
The Role a Broker Plays
Like all forms of investing, trading digital options depend on the use of a broker. This is a legal requirement, but it also makes things much easier, too. You wouldn’t want to go out on the market and chase down sellers every time there’s an option you like. Having a broker do it also means you have more time to focus on other things – perhaps more investing.
Brokers will also provide you with digital option trading software. There are plenty of platforms you can find independent of a broker, as well. Software is important for analyzing the market and making educated decisions about the right investments.
The Advantages of Trading Digital Options
In closing out, let’s touch on a few points that make digital options such an attractive option for people who want to make money.
First, they’re a very, very cheap way to get started. You don’t need thousands of dollars to begin.
Second, the barrier of entry is nonexistent. Aside from the minimal money requirements, you can also learn about digital options without going back to school, taking expensive courses or paying an expensive portfolio manager to do everything for you.
Third, it’s a very democratic form of trading. People have become rightfully cynical when it comes to trading stocks. With digital options, it’s not about knowing the right people. It’s about putting the time into studying the market and learning how these options work.
Fourth, you get insanely quick turnarounds when compared to other investment vehicles. While this also makes trading digital options a lot more fun, this quick turnaround time will do a lot for your learning curve and profits, too.
Digital options are here to stay. With this introduction behind you, you should now feel ready to take the next step toward making money from them.