Binary Options

ALEX NEKRITIN is CEO and President of TradersChoiceFX, TradersChoiceOptions, and TCForex, one of the largest introductory brokers in the world. Mr. Nekritin has been trading in equities, options, futures, and Forex very successfully for more than a decade. He holds a degree in finance with a concentration in derivative instruments from Babson College in Wellesley, Massachusetts. Alex's work has been featured online at FXStreet.com and TradingMarkets.com.

• Foreword xiPreface xiiiAcknowledgments xviiPart I Introduction to Binary Options 1Chapter 1 What are Binary Options? 3On What Asset Classes Are Binary Options Available? 3Binary Options vs. CBOE (Vanilla) Put/Call Options 10Advantages/Disadvantages of Binary Options 13Reasons to Trade Binary Options 14Part II Binary Options theory 17Chapter 2 What Does Binary Mean? 19Components to a Binary Option 20Long Trading 22Short Trading 24Chapter 3 Pricing 29Strike Price 29Time Value 30Price as a Natural Market Consensus 32Reading a Binary Option Chain 35Part III Trading Binary Options 41Chapter 4 Binary Options Contract Collateral 43Margin and Debit Risk of Vanilla Options and Futures 43Collateral Explained 44Binary Options Expiration Values 44Collateralizing a Long Trade 45Collateralizing a Short Binary Options Trade 50The Mechanics of a Binary Options Short Trade 50Chapter 5 Settlement 59Settlement on Binary Option Long Trades 59Commissions and Fees 73Chapter 6 Entering and Exiting Binary Option Trades 75Reading Quotes 75Reading an Order Ticket 76Exiting Trades 78Exiting Your Trade before Expiration 81Chapter 7 Keys to Trading Binary Options and More Examples 95Gold Binary Examples 96Copper Binary Examples 99Part IV Binary Options Trading Strategies 105Chapter 8 Volatility Trading Explained 107Taking a Volatility Long Position (Buying Volatility) 108Regulating Success Probability and Payout with Strike Prices 111Taking a Volatility Short Position (Selling Volatility) 113Regulating Range and Payout with Strike Prices 116Max Loss, Collateral, and Max Profit Summary Table 120Chapter 9 Binary Option Behavior as Expiration Approaches 123Understanding Delta 123Delta and Price 127Chapter 10 Technical Trading Strategies with Binary Options 129Support and Resistance 130Breakout Trading 135Chapter 11 Fundamental Trading Strategies with Binary Options 139News Releases 139Political Events 144Speculating on Actual News Releases 147Economic Data Releases that You Can Speculate On 149Part V Creating Your Binary Options Strategy 153Chapter 12 Systems with Binary Options 155Finding Your Edge 155Proper Trading System Development 156Back-Testing Binary Options Strategies 158Three Back-Testing Rules 162Chapter 13 Negative Emotions 165Greed and Fear 166How to Handle Negative Emotions 166Find the Right System for You 168Practical Steps to Mitigate the Negative Emotions 175Chapter 14 Risk Management 183The Process 184Determining Position Size 185Risk Management on Option Spreads 190Relationship between Position Size and Trading Psychology 199Handling Unexpected Market Volatility 199Benefits of Binary Options on Trading Psychology 202Discipline of Expiration 206Part VI Managing Your Binary Options Account 209Chapter 15 Proactive System Improvement 211System Cutoffs 212Drawdown 212Consecutive Losing Trades 215Reinvestment Rate 216Diversification and Account Distribution 220Intersystem Diversification 220Account Breakdown 221Part VII Profiting with Volatility 223Chapter 16 The Volatility Short Trading Rules 225Premium Collection 226Rule 1: Cut Off Your Losing Trades 231Rule 2: Collect Enough Premium 234Rule 3: Sell Far Enough Away from Market Price 240Rule 4: Use Underlying Instruments that Revert to the Mean 242Rule 5: Sell Options with Proper Duration until Expiration 244Rule 6: Perform Additional Analysis in Order to Get a Feel for Market Direction 246Rule 7: Attempt to Make Your Market 255Conclusion 256Glossary 259Index 263