About Botoptions.com. Contents

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1 Welcome Introduction to the Essential Binary Options Guide. In today s markets the active trader and investor needs to be equipped with the right information, tools and support. At Botoptions.com we aim to assist both new and experienced traders by providing you with the key essentials to trading Binary Options. Our five part Binary Options Guide has been developed to get you up and running as quickly and smoothly as possible. You will learn the basics of Binary Options and understand the essential components of a binary options trade in an easy to understand format. Not only do we have five distinct Binary Option trading options developed to suit different levels of trading and risk experience, but our educational programme is also geared to assist you in developing your trading skills and hopefully to help you become a successful professional Binary Options trader. Together with our educational resources and new online trading platform you will find everything you need to make your trading experience enjoyable.

2 About Botoptions.com Established in 2008, Medsted Associates Limited is a leading, independent Introducing Broker to Spread Betting, Forex, CFDs, Derivatives, Equity, and Commodity trading houses. The company offers private, institutional, and white label clients, an integrated approach to trading diverse financial products online via a wide choice of Regulated Financial Houses. Our focus is on building long term relationships with our valued customers and providing them with excellent information, charting and education. Contents Part 1. About Binary Options Trading Part 2. About Calls and Puts Part 3. About Orders Part 4. Popular Markets Part 5. Putting it all together Medsted with the BotOptions electronic platform provides clients 24 hour Binary Option trading and support. For further information please visit Contact: Medsted Associates Limited BotOptions Electronic Platform TRIDENT Trust Company (BVI) Trident Chambers P.O.Box 146, Road Town Tortola, British Virgin Islands admin@botoptions.com

3 1.1 About Binary Options Trading Although Binary Options Trading has been around since the mid 2008, but it is only recently that the industry has seen phenomenal growth. Many industry experts believe that we are still in the infancy stages and as the industry expands, it has opened the doors to retail traders and investors alike. With the fast development of on-line trading platforms and access to a wide variety of markets, there has never been a better time to get involved with binary options trading. Binary options is rapidly becoming the choice of investment vehicle for today s investors and traders

4 1.2 What is binary option trading? A binary option is a standardized short term contract with a pre-determined profit/loss, that cannot be liquidated (buy or sell to close) before expiry. It simply involves speculating on the direction of price fluctuations. Whether you are speculating or hedging, binary option trading is a cost effective way of gaining entry to the financial markets. It is a derivative option product traded on margin and based on an underlying market. 1.3 The key concept In a nutshell, binary option trading means that using a small amount of your capital, you can profit from up and down moves in the financial markets. It is a way of trading the stock markets without actually owning any shares or assets and you simply speculate on the price movement of a share, index, commodity, currency or a bond. If you believe from your analysis that a particular market is going to rise, then you would place a bet of your chosen amount on that market in the expectation of a move higher than your opening price during the time period chosen. If your analysis proves to be correct you make a profit and if wrong then a fixed and predetermined loss would be incurred. You can actually make money from both rising and falling markets using binary option trading. More details of this concept will be covered during this course. Any profits you incur may be tax free in some jurisdictions. You may want to get independent professional advice before using binary options. But also remember that any losses you incur are not tax deductible.

5 1.4 The advantages of Binary Option Trading There are many advantages to Binary Options Trading versus traditional methods of trading. Listed below are some of the reasons why binary options have become so popular. Easier to understand compared to other financial instruments Can be traded from short term to longer term positions Profit from rising and falling markets Start with a small amount of capital You only pay a fraction of the full cost of the trade a premium for the right. As you can see the benefits for binary options are considerable and certainly advantageous compared to many other forms of trading. Under current legislation all profits made from binary option trading in some jurisdictions may be tax free*. There is also no commission payable on your trades as the dealing charge is incorporated in the spread. This creates greater transparency in the valuation of your net profit. * Tax Laws may be subject to change. Always get independent professional advice on tax issues. At Botoptions.com, we quote a wide range of financial markets and products. For more information, please view our market information sheets. No commissions to pay Access to a wide range of markets Only one account required for a wide range of markets Minimum paperwork compared to share dealing Instant execution Extended trading hours Online dealing Unlimited profits with limited losses

6 1.4 The risk of binary options trading Although binary option trading can be a profitable venture, trading does have risks attached. Because binary option trading carries a predetermined and fixed level of risk, you should only speculate with money you can afford to lose. Although there are no margin calls in binary option trading, continuous losses may result in a large loss. Thus, always speculate with moneys you can afford to lose. Movements in the Underlying can be volatile and unpredictable. This is why it is imperative that you understand not only the market you decide to trade on but also how much moneys to use based on your account size. You must ensure that you understand the potential consequences of any particular trade and be prepared to accept that degree of risk. Binary option traders are advised to start trading with small sizes and to trade low volatility markets and only increase once they have a full understanding of market environments and gained experience. Special attention is also required in understanding the different types of trading instruments one can use. With Botoptions.com you can trade on Currencies, Indices, Commodities and Stocks. Examples of the different type of contracts you can trade will be covered in a later chapter. Before trading binary options you should ensure you fully understand the risks and seek independent professional advice if necessary. 1.5 Understanding the BID OFFER spread Binary option trading can be thought of as a two way price. Let s say for example that you are traveling to a foreign destination and require some money to be exchanged at the airport. The cashier will quote you a price for the currency as follows: The price on the Left side is referred to as the BID or SELL price and the one on the Right is referred to as the OFFER or BUY price. In this example you are being offered a price of 155 to BUY. If you buy and decide for any reason to sell the currency back then they will only pay you the bid price. In this example you purchased at 155 and returned the currency back at 150. The difference between the bid and the offer or in other words the sell or buy is called the SPREAD. 150 BID - SPREAD 155 OFFER It is important to know that in fast moving markets, prices can move rapidly whereby the bid and offer can change in seconds. In some cases the spread can also widen in uncertain markets or due to an unseen force outside of the markets.

7 In binary options trading you are not quoted a spread. You are only quoted one price which you can choose to buy or to sell. In the older days of foreign exchange trading via a telephone broker that was a choice price. So you are given a choice to buy or sell at a unique price. This price is calculated automatically in the binary options platform, and is the mean price between the bid - offer spread. In this case the platform will quote you ( )/2 = Having chosen the price, this might change either up or down. Therefore you could potentially profit or lose money very quickly. Hence the requirement to understand the markets fully is essential. 1.6 The LONG and SHORT of binary options Some people new to binary options can become confused with the terminology used by traders. Like with anything else, in a matter of time and with practice you can become quite proficient with the language used. Let s say you think the price of a particular market in question will go up then you BUY. In market terminology we can say that you are LONG the market. Likewise, if you think the price will fall, you SELL and we can say that you are SHORT of the market. Remember you do not necessarily own the physical instrument, you are simply backing your trading judgment and speculating on the price movements only. So if you are Bullish and you think the market will rally by rising up you open a LONG position and you will buy a CALL. If you are Bearish and you think the market will fall you open a SHORT position and you buy a PUT. To help explain further lets now - look at a worked example.

8 1.8 A binary options trading example The best way to explain the key components of a binary option is through a worked example. Example It s the 4th Feb and the UK 100 June is trading at The official contract expiration is 20th June (please see market information sheets for market expiration). You will be holding your position for let s say 60 minutes. Payout will be 80% if you are correct. Botoptions.com is quoting a choice price in UK 100 June: UK 100 June SELL 6710 BUY You have two options: Option 1: You think the market will rise and BUY $10 per point CALL at Option 2: You think the market will fall and BUY $10 per point PUT at Note: The UK 100 Index is based on the top 100 capitalized stocks in the UK. You have chosen the contract expiry to be June and your trading time will be 60 minutes. Contract terms state that if you hold a position Botoptions.com will automatically settle this position at the official settlement price calculated by the underlying exchange 60 minutes later. The stake of $10 at 80% payout indicates that you will gain $8 if the UK 100 rises or falls in 60 minutes. If you were wrong you will lose $10. 20th June: 60 minutes later Market expires at 6900 Outcome of Option 1: You were correct to BUY the market did indeed rise. Your profit is 80% of your stake of $10. Opening Level 6714 Closing Level 6900 Difference 186 You bet $10 on a PUT PROFIT: 80% x $10 per point = $8 Outcome of Option 2: Your view to SELL was incorrect. Your loss is predetermined at $10. Opening Level Closing Level Difference You bet $10 per point LOSS: = -$

9 1.9 How to close a position before expiration The previous example is an illustration of a trade held for 60 minutes. You are obligated to leave a position to expiry; you cannot close the position at any time before the expiry date/time. This is a difference of the binary options when compared to other types of trading Conclusion As you can see binary option trading is quite simple to understand and with many benefits attached providing you do not over expose yourself to unnecessary risks. At this stage learning the concept and terminology will help you get started on your journey to successful binary option trading. Like with anything else, consistent practice along with the right education and tools one can become quite proficient to a certain degree. In today s markets it is essential to understand that there will be opportunities to capitalize in future price movements. However, as the financial markets become increasingly dynamic and investors become more savvy, Botoptions.com aim to help you improve your knowledge and skills to prepare you for future opportunities

10 2.1 About Calls and Puts Binary Option trading offers considerable advantages over share trading for active and experienced investors. Traditional share trading requires one to purchase shares on a per unit basis. In other words if you were considering buying shares of XYZ company which are trading at $10 per share and you were to purchase 100 shares, then your initial outlay would cost you $1000 which is simply $10 X 100, $10 for every share that you owned. When trading with binary options you only need to choose the direction of the price of your favorite financial asset, in this case shares, you believe will go. If you think it is going up you need to buy a Call. If you think it is going down you need to buy a Put. Calls and Puts are said to be Out of the money, In the money and At the money. We will come back to these three definitions later. So when purchasing shares in the traditional manner you are required to have the full amount of capital available before you buy the shares compared to binary option trading, where you are only required to have a deposited token amount and choose direction.

11 2.2 Out of the Money Options Binary options are cash settled as European style options, meaning they can only be exercised on the expiration date and time. If at expiration the price of the chosen financial instrument is lower than the price at the time of the trade then the Call is said to be Out of the money. Similarly if the price of the underlying asset at the time of expiration is higher than at the time of the trade, then the Put is said to be out-of the money. In both cases the binary options trader will lose a predetermined amount the premium paid. 2.3 In the Money Options If at expiration the price of the underlying financial asset is higher than its price at the time it was traded, then the Call is said to be In-the money. Similarly, if the price of the underlying asset is lower at expiration than at the time of the trade then the Put is said to be of In-the money. In both cases the binary options trader wins and receives the predetermined percentage of his premium paid.

12 2.4 At the money Options When the underlying financial asset at expiration has exactly the same price as at the time of trading, then we call the option to be At-the money. In this case you receive back the amount of your premium paid. 2.5 An example of a binary options trade Let s now take a look at a trade example using binary options and as to how profit/loss is calculated. For each trade you open you will be required to deposit (or have available in your account) funds to cover a proportion of the bet which is known as the Premium. This is simply a deposit in order to open a binary option bet. The premium will usually be a small percentage of the notional value (or total value) of your trade. Details are available by clicking the button in the platform trading panel. Alternatively information on the markets you would like to trade can be found in the market information sheets. Example You Buy $10 Call of XYZ at Botoptions.com has set the Payout of XYZ at 80% and the time to expiration at 10 minutes. If you buy $10 Call per point of XYZ at 1.90 you would need to deposit or have $10 available in your Trading Resources to cover this trade. Note: Each market has its own volatility, even amongst individual shares. The volatility rate may change dramatically (for instance where the price volatility of an equity may increase substantially)..

13 For purpose of comparison, if you bought the above through a traditional broker you would be required to pay the full value of the trade. A $10 bet is equivalent to 1000 shares in the underlying market. Ignoring commission, you would have to put up 1000 x $1.90 = $1900 to take out the equivalent trade. This is one of the key advantages of binary options trading you only need to have a view on the direction you believe the market would take. For a small initial outlay (premium) your profits can be substantial. Please bear in mind that this can apply to losses as well so you should always be aware of the amount of moneys you are using. Cash: Premium(Initial): Open Profit/Loss: Trading Resources: $ ($10.00) $8.00 $ The overall position on your account is your trading resources. This is made up from your cash balance, the premium you pay, plus any profit on your open positions. We have assumed that you are currently making a profit of $8.00 from the XYZ Call trade. Both the premium and open profit are variable components and will change when market prices change. It will be finalized in 10 minutes after the trade was initiated, at expiration. 2.6 A Margin Call There are no margin calls in binary options trading. However, you must be very careful with the resources you use for trading. You may incur subsequent losses with binary options trading. Therefore you must put very strict limits on the total amount of moneys you are willing to risk for binary options trading. Never overextend yourself and never overtrade. 2.7 Conclusion We can immediately ascertain the benefits of binary option trading. With the increase in popularity and growth of this type of trading, harnessing leverage in the correct manner can help magnify profits using small amounts of money and placing your reserve capital in an interest paying account. But we should always remember that it is the sensible usage of derivatives rather than the abuse which generates profits. At all times we should be aware of the risks associated and seek to control losses through correct position sizing and money management. Remember never - trade with money you cannot afford to lose

14 3.1 About Orders At Botoptions.com we are committed to providing all the tools so that you, the investor, can make informed trading decisions. We believe it is important for clients to manage their accounts effectively, and the subsequent risk that may be incurred. Binary options trading carry a degree of risk, so whilst it is possible to make substantial profits, it is also possible to write significant losses. Botoptions.com offers a number of ways to manage your risk through the use of order management.

15 3.2 What is an Order? An order gives you the option to open a trading position at a specific price chosen by you. Therefore, it is an instruction you give to Botoptions.com to execute a trade at a certain price level. You may choose to buy or sell a particular market at your chosen level in order to open a long or a short position. 3.3 Why would you want to place an order? You may want to trade at current market levels because you think that the market at expiration will be either a higher or lower level than the prevailing price. This could be for a multitude of reasons, such as the market reaching your projected target level, or for technical reasons, such as capturing support and resistance levels in the market. Botoptions.com allows you to determine the expiration time and the amount you are willing to risk. By modifying these two parameters your payout levels do change. Make sure that you test the platform by changing these two basic parameters before you place an order. When you are ready and you feel that you have a definite opinion on the market s upcoming movement you then may want to choose to buy a Call or a Put. Press the right button and then sit back and enjoy the market s ride!

16 3.4 Long term trading At Botoptions.com you have the chance to place orders for Long term trading. An order to buy or sell an instrument once the price of that instrument reaches a specified price for a long expiration is called Long Term trading. You may use this option if you have a longer term view of the market you are trading. The advantage of this option is that a short term fluctuation in price does not affect you. You bet $10 per point, therefore 100 x $10 = $1000 loss Not with Binary option trading. When you use binary options you wait for the market price the day and time of expiration. Only then your real profit/loss is determined. It is a real advantage of binary options not to have to worry about daily volatility. Example You bought $10 UK 100 at You decide that you want to limit your short term risk from intraday fluctuations and choose the Long Trade option in your trading platform. Your expiry now is 30 days later. Your position remain valid even if the market falls 100 points below your entry point The UK 100 did indeed fall to 6250 the first day of trading but this does not affect you at all. In all other forms of derivatives trading you would have already incurred either an open loss or an actual loss if you had a stop-loss order in the market. By way of example: Opening Level Closing Level points

17 3.5 Sixty Seconds An order where the customer sets a maximum expiration time to sixty seconds he/she is willing to pay (as the buyer) for a specific direction he/she believes the market is heading. This is a rapid fire trading for maximum profit in minimum time. This option is suitable for traders who can get into the market rhythm especially when there is a highly volatile market. 3.6 One Touch Botoptions.com offers novice clients a facility whereby the trader is being able to choose a price that he/she feel that their chosen asset can reach during a live binary options contract time period. Both the strike price and target price are known in advance. This means that the trader will know just how far the price must travel in order for him/her to profit. This also means that you ll know just how much risk is involved. One Touch trades offer two possible final results, the same as all binary options trades. The asset price will either reach or exceed the target price goal and the trader will earns a profit; or the asset price does not touch the target price and the investment amount is lost. In order to profit, the underlying asset price just needs to touch the set target price. Just one touch and the trade ends in the money. It does not matter how the asset price moves about before touching the target price, nor will it matter how it moves about after touching. The only thing that matters is that the price does touch at some point while the binary options contract is open. When should the One Touch strategy be best put to use? This would be the times during which the asset price is trending either up or down. The trend will need to be strong in order to cover the ground between the strike price and target price. Should you feel that the price of the asset will make a strong run for a period of time, but will not be able to maintain its high or low places, the One Touch strategy is a fine choice.

18 3.5 Sixty Seconds An order where the customer sets a maximum expiration time to sixty seconds he/she is willing to pay (as the buyer) for a specific direction he/she believes the market is heading. This is a rapid fire trading for maximum profit in minimum time. This option is suitable for traders who can get into the market rhythm especially when there is a highly volatile market. 3.6 One Touch Botoptions.com offers novice clients a facility whereby the trader is being able to choose a price that he/she feel that their chosen asset can reach during a live binary options contract time period. Both the strike price and target price are known in advance. This means that the trader will know just how far the price must travel in order for him/her to profit. This also means that you ll know just how much risk is involved. One Touch trades offer two possible final results, the same as all binary options trades. The asset price will either reach or exceed the target price goal and the trader will earns a profit; or the asset price does not touch the target price and the investment amount is lost. In order to profit, the underlying asset price just needs to touch the set target price. Just one touch and the trade ends in the money. It does not matter how the asset price moves about before touching the target price, nor will it matter how it moves about after touching. The only thing that matters is that the price does touch at some point while the binary options contract is open. When should the One Touch strategy be best put to use? This would be the times during which the asset price is trending either up or down. The trend will need to be strong in order to cover the ground between the strike price and target price. Should you feel that the price of the asset will make a strong run for a period of time, but will not be able to maintain its high or low places, the One Touch strategy is a fine choice.

19 3.7 Trading Pairs Trading Pairs is a quite simple and direct way to trade in relative performance of stocks and profit by predicting which stock within a given stock pair will perform better. If you selected the better performer you will receive a predetermined payout. This payout is shown on the platform when you place a trade and varies with the pair, the option type and the prevailing market conditions. Botoptions.com payouts can be as high as 250%. When trading Binary Pair Options, you are paid only if you selected the better performing stock. One of the unique characteristics and benefits of trading Pairs is that you do not need to worry about the general market movements. You can profit even when the market goes down. This because what counts is only the relative performance between the two stocks the trader chooses which one underperforms and which one out-performs the only factor that has an impact on the Pair Option value. Even if the stock you chose went down, what matters is how the other stock performed. If its price declined more than the first stock, your Pair Option will be in the money. Example $182 ($100 initial trade + $82 return). If ABC is the better performer, your option has expired "Out of the Money" and you don't get a payout. With Pair Options, you don't have to wait until the expiry since the platform allows the trader to close his/her position before expiry. Note: Pair Options are Market Neutral. This implies that you can make a profit even when the market goes down. Pair Options are based on comparison, and only relative performance counts. Pair Options give you complete flexibility: you can open or close your position at any time. You can exit and take profits or cut your losses. Pair Options pricing is transparent: no hidden costs, absolute loss cap limited to the option price, payouts are shown continuously and are updated during market trading hours. For the pair XYZ / ABC you open a Fixed Pair Option trade of $100. You picked XYZ to be the better performer by the end of the day. The option is set to return 82% if XYZ performs better. Relative performance is measured for each stock from the time you placed the trade (option start). If XYZ is the better performer, your option expired "In the Money" and your payout is

20 3.8 Conclusion Using the various market orders can be a creative way of managing your trades. Rather than sitting and watching a screen all day, you can utilize the various orders to get you both in and out of a market. Also the unique aspect of binary options trading is that you are able to protect your account if you believe the markets are too volatile for your personal risk appetite. And of course utilizing the various methods can be integrated as part of your trading strategies as appropriate. Today s trader has tools and mechanics which were a luxury in the past and can be used to a great advantage for the various markets.

21 4.1 Popular Markets Binary option trading has changed the way today s investor trades the markets. One of the main attractions of binary option trading is that you can trade a range of stocks and various markets, all from one account, all around the world. There are five main categories of markets that are popular for today s binary option trader and you can choose to trade either one or all of the instruments on offer depending on your appetite for risk and the availability of cash in your account. The broad categories with examples are: SINGLE SHARES UK, EUROPEAN and US STOCK INDICES FTSE 100, DAX, CAC, S&P 500, and Dow Jones. COMMODITIES Gold, Oil, Wheat CURRENCIES Sterling, US Dollar and the Euro and the major crosses.

22 4.2 Single Stocks You can have access to selected shares both on the major International exchanges with Botoptions.com. The advantages of Binary option trading on shares is becoming increasingly apparent. Here are a few examples: Trade on leverage: buying shares through a traditional broker requires you to put up the full value, or 100% of the equity deal. At Botoptions.com you choose the premium you would like to risk, as low as $10. Profits may be free from capital gains tax in some jurisdictions.* There is no commission to pay. You can sell (buy a PUT) equities to open a position as well as buy them. This may be advantageous if you decide to hedge an underlying equity position or believe that certain equity is overvalued and want to take advantage of a potential fall in the share price. Our minimum bet size typically starts at $10. You can execute your trades immediately on our live platform. *Tax laws are subject to change and may differ from jurisdiction to jurisdiction. Always seek independent professional advice on tax issues. 4.3 Stock Indices Trading on a stock index is similar to trading on shares in that you are trading a basket of stocks rather than just one individual share. Stock indices may be classified in many ways, but it is simply a broad based index which represents and measures the performance of a basket of underlying stocks. In turn, this reflects investor sentiment on the state of the economy. Changes in the index reflect changes in the value of the stocks. Botoptions.com provides prices on a range of global stock market indices such as the UK 100, Wall Street and the DAX. Binary option trading on stock indices hold many advantages: Trading indices allow you to gain an exposure to a large number of different shares in one single transaction. Therefore, as an investor, you can take a view on the direction of the entire index without knowing in detail or taking a view on the individual companies that make up that index. Binary option trading allows individuals to take short positions as well as long positions. Shorting indices can be very useful for those seeking to hedge an underlying portfolio of stocks should they anticipate a fall in the market.

23 Botoptions.com provide quotes on all of the following stock indices: US Markets NASDAQ US S&P 500 NASDAQ FUTURES DOW Example Europe UK 100 DAX 30 IBEX CAC Global Indices BOVESPA At Botoptions.com, we trade 60 minutes orders and pairs on all of the indices above. The minimum bet sizes are the same as our other markets and our trading times may be much longer than in the underlying markets. You can view minimum stakes and trading times in our market information sheets. STOCK INDEX TRADE Important information that you should be aware of before you trade: Opening a position: The DAX Index is trading at a near term high. Your analysis shows that the market is overheated so you decide to sell the index in order to catch its fall from the highs, something you believe will happen in the next three hours. Botoptions.com is quoting a choice price in DAX: DAX: You sell $100 at For starters you have a protected amount of $10. You have a potential payout of 70%. Should the index retreat from its highs and expire below you will gross $170 ($100+$70). 1. What is the bet? (minimum $10) 2. If you want to buy the index go to CALL 3. If you want to sell the index go to PUT 4. What is the dealing period? (07:00 21:15)

24 4.4 Commodities As the global economies have grown, commodities have become increasingly popular for today s trader. Commodity markets offer you the opportunity to take a view on a vast array of products such as: Precious metals; including Gold, Silver and Platinum. Soft commodities; including Sugar and Coffee. Grains and livestock; including Corn and Wheat. Energy contracts: including Oil Clients should be aware that commodity prices can move spectacularly at times. Markets such as Sugar and Oil can halve or double in value in a short period of time. Supply and demand issues can significantly affect the volatility of certain markets due to crop surpluses or sudden extreme weather conditions that can wipe-out an entire crop. The risks are compounded due to the fact that many of these markets have price limits. All our commodity products vary in the way they trade and the trading hours due to the nature of the underlying markets. If you are interested in trading commodities please refer to the market information sheets for clarification on expiry dates, and other important information since these may differ significantly from the underlying market. Anyone can take trade these instruments but we have found that commodities are more suitable for experienced traders. However this does not mean you should not trade commodities but rather a basic understanding of how they function is a good idea for novice traders. Example One Touch COMMODITY TRADE Important information that you should be aware of before you trade: 1. What style you want to trade? (Long term) 2. When does the sale end? (date and time 3. What is the amount in units? ($10 or 1 unit) 4. What is the expiry of the option (date time) 5. What is the payout? (180%) 6. Is there a protected amount?(0) Opening a position: Today is August 25 th, the sale is open up to 21:00:00 and you believe that the price of Gold will increase and reach its target rate of 1450 at expiration on the 30/08/13 at 15:00:00. Botoptions.com is quoting Gold Rolling at: Gold Rolling: You buy $10, at to OPEN your position.

25 Closing a position: Today is August 30 15:00:00 and Botoptions is quoting: Gold Rolling: The market has moved against you after the government announced that it was looking to sell some of its gold reserves. Your position has now expired and you have lost $ This trade resulted in a net loss and therefore the result Is - Loss: $10.00 There is no protected amount for this trade. 4.5 Currencies Currency trading has exploded over the recent years with the advances in technology and the internet. In fact, with the recent exponential growth in global economies, currency trading is becoming increasing popular for traders old and new. A foreign exchange rate is the amount of one unit of currency needed to sell (or buy) in order to buy (or sell) one unit of another currency. It is important to fully understand that when trading currencies, you are buying or selling the one against the other. As currencies are quoted in pairs, it is the first currency (nominator) that you are trading against the second currency (denominator). So if for example you are watching Euro / Dollar and you are buying then you are expecting the Euro to strengthen and the Dollar to weaken. On the other hand, if you are selling then you expect the Euro to weaken and the Dollar to strengthen. Remember the underlying currency is always the first named currency that is quoted in the pair and is always the one that you buy or sell against the other currency in the pair. The bet per is the last figure before the decimal place in the quote. For example, the British Pound/US Dollar Spread is / so a move from to is one point. Similar to commodities, currency trading is considered a higher risk vehicle and as currency trading can be volatile it may not be suitable for all traders. As with all markets, common sense and control of risk is very important.

26 Example Your profit is calculated as below: STOCK INDEX TRADE Opening a position: Today is March 1st and Botoptions.com is quoting GBP v USD Rolling Spot (also known as Cable ) as: GBP v USD choice In this currency pair, the British pound is the first named currency and therefore the underlying currency. You have 2 options: OPTION 1: You believe the British pound will appreciate against the US Dollar (US Dollar will weaken against British Pound); you BUY British Pound/US Dollar. OPTION 2: You believe the British pound will weaken against the US dollar (US dollar will strengthen against British pound); you SELL the British pound/us dollar. You decide that the British pound will appreciate against the US dollar so you BUY at for $10 per point. Closing a position: Today is March 5th and after a few days of volatility your trade is due to expire. The Botoptions.com quote is: GBP v USD: At expiration the closing price is: Opening Level Closing Level Difference You bet $10 per point, hence your profit is calculated as; 127 x $10 per point = $127

27 4.6 Conclusion Having seen the various types of markets you can trade, this should give you an idea of the variety that is available to today s traders and investors. Basically the global markets are easily accessible and available at your fingertips with today s enhanced computer technology and with the speed of the internet. There has never been a better time for traders to embark on a journey to trade the markets at highly reduced costs and increased efficiency. With a choice of broad markets, one can now look for opportunities which may exist in one area whilst not available in another.

28 5.1 Putting it all together Now that you have an understanding of the essentials on binary option trading, you can start by putting this into practice. There are a few more points you should consider though before dipping your toes in the water. It makes sense to get to know your markets and how they trade. Each market has its own personality and with experience you should be able to recognize the characteristics of your chosen market. Learning to recognize opportunities is important but equally and if not more important is understanding the pitfalls of trading and also your own personality. You will also need to ascertain whether you are trading for the short term or for a longer time period. In binary options trading you can essentially make use of five types of contracts for both time frames.

29 5.2 Trading Styles There are many different styles of trading but ultimately you will need to decide if you are trading for the Short Term, Intermediate Term or for a Longer Term time frame. Each style is has an objective to make a profit from the markets but dependent on whether a trader is looking to get in and out of a market very quickly or by holding a position for longer periods of time. A short term trader may be seeking to profit from a market movement on an intra-day basis whereby they may be in and out of a market within seconds to minutes. A longer term trader may hold a position from weeks to months. You will need to decide on which time frame is suitable for you personally. Take into consideration how much time you have available for trading the markets. If for example you have a few spare hours in the morning or evening then you might want to consider short term trading. Technical Analysis Simply put Technical Analysis is a way of looking at the markets using Charts. Technical traders believe that ultimately the relevant information is factored into the price of the market. They will often use Price, Volume, Patterns and Indicators to forecast market moves. In this school of thought, traders believe that past price patterns can be used to forecast future moves and using historical studies as a foundation, one can find a positive trading edge to trade with. There are thousands of technical methods one can choose from but instead of looking for the Holy Grail, one should focus on Risk Management and Trade Management. Our in-house seminars are developed to teach you Technical Analysis in more detail. If on the other hand you have more time on your hands and believe that a particular market is going to make a substantial move which may last for several weeks then of course this would be suitable for individuals who are able to ride out the longer term trades. The next area to consider is if you are going to use Technical Analysis or Fundamental Analysis.

30 Fundamental Analysis Fundamental traders seek to find value and tend to be geared more to the longer term time frames. Most fundamental traders will tend to incorporate a form of a top down approach by looking first at the Economy followed by the Sector and then the Stock. They may also consider looking at financial statements to derive a stock s current fair value and forecast future value. Fundamental traders may also seek to keep an eye on analyst and broker recommendations as well as PE ratios and Interest Rates to form an evaluation on the current price. Technical or Fundamental Whether you decide to use Technical Analysis or Fundamental Analysis as your approach, the most important aspect to always keep in mind is that one may not be better than the other but rather which method is suitable for your own personal approach to trading the markets. 5.3 Trading Psychology A solid trading plan is critical for your trading success. You will want to consider the following points when creating a basic trading plan: Your goals and preferences The markets you want to trade The timeframe you want to trade The trading approach you want to use Your entry signals The money management rules you will want to apply But equally of importance is Trading Psychology which is focused on the study of human behavior. It is been said by many academics that the reason that most traders lose is because they are not psychologically prepared to trade. In any field whether it is business, sports or trading, one should always incorporate the utmost aspects of discipline and patience. Without an understanding of trading psychology your chances of success can be dramatically limited. If you are to succeed in this field then you will want to at least understand the basics of trading psychology. Although this is a large and complex area to cover, there are many books on this subject arena. A good place to start with is by visiting your library or local bookshop in browsing through the trading psychology section.

31 5.4 The next step If you are a newcomer then the best way to understand binary option trading is to try it out. Start by looking at some of the indices such as the FTSE 100 or stocks that you may be familiar with. It is important to remember that trading with small trades sizes in order to understand the process is advisable rather than just jumping in an over trading your account. Why not sign up for our highly recommended in-house seminars which are Free for clients and also log onto our website to register for the next event. You can also contact us directly if you have any questions on opening up an account to managing your account. Alternatively, feel free to call and speak to one of our account managers and discuss your personal requirements. At Botoptions.com we are committed in helping you to succeed whether you are new to trading or experienced. 5.5 Conclusion Binary options trading is an exciting and popular business to be involved in. Now that you have covered the essentials and are probably eager to get started, do remember that successful trading is a journey and not a race. Ensure that you have a full understanding of the basics of opening a position. Take a moment to read through our market information sheets on opening hours of each market which is on our website There are also many other resources which you may need help with in getting started such as trading software recommendations as well as books and further courses. Details of these will be provided and updated on a regular basis on our website under the education section. Finally we wish you the very best in success and profitability with Botoptions.com and look forward to meeting you in person at our educational events. Binary Options are cash-settled as European-style options, meaning they can only be exercised on the expiration date. If, at expiration, the options settle in-the-money, the buyer or seller of the options receives a pre-specified dollar amount. Similarly, if the options settle out-of-the-money, the buyer or seller of the options receives nothing. This provides a known upside (gain) or downside (loss) risk assessment. Unlike traditional options, Binary Options provide full payout due to a single pip movement.