Binary Call Options

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  Buy binary call options on the S&P 500 Index when you expect markets to rise.Stock Market image by Paul Heasman from Fotolia.com
  
  Trade binary call options when you have a clear perspective about the direction of market prices. Because binary options provide a yes or no return, your option trade makes money when the underlying security of your option trades above the expiry strike price. Binary option calls track the underlying S&P 500 Index (symbol SPX) and the CBOE Volatility Index (symbol VIX).
  
  A call option provides the right to buy the underlying security at a given price for a certain time. For example, a long SPX binary 1325 call gives buyers the right to buy the S&P 500 Index for a certain period at a specific price.
  
  Traders purchasing binary calls expect the market to rise. If underlying prices fall during the option's life, losses result.
  
  Call options provide leverage to investors. Binary calls, priced in cents up to 100, return a maximum of $100 per contract. Investors may own up to 1,500,000 options on one side of the market. All CBOE binary calls trade through the AAA-rated Options Clearing Corporation.
  
  
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  Short-term trading instruments like binary call options may rapidly change in value during the trading day.stock market analysis screenshot image by .shock from Fotolia.com
  
  Form market direction perspective before buying a binary call option. Some traders evaluate market orders to buy and sell any security as a way to evaluate short-term price trends. Traders using NASDAQ Level 2 calculate short-term trading direction by comparing the percentage of buy orders to sell orders for any security. When more buyers than sellers for a contract exist, prices usually increase in the short term. When more sellers than buyers line up, downward price pressure occurs.
  
  Study technical charts and reports before buying binary call options. Technical market research plots historical price movement of a security. Technical research analysts look for support and resistance levels of a security. Support levels form when a large number of buyers appear to purchase the security at a certain price. Resistance conversely occurs when sellers choose a price point to sell. Technical research does not incorporate fundamental analysis or deeper study of the financial and management of any security.
  
  
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  Review the economic indicators that may affect binary call option prices.glasses on newspaper image by Alexander Zhiltsov from Fotolia.com
  
  Review economic conditions before trading binary calls. In a short-term trading environment, economic indicators such as housing and unemployment may cause the market to decline. Rising interest rates, lower housing starts and events occurring outside of the domain of the markets affect how the market trades. The Economic Calendar, published free by many providers of financial information, helps traders avoid surprises. Because the Economic Calendar tracks when certain potential market-moving announcements occur, traders bookmark it.
  
  
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  Review technical reports before purchasing binary option calls.stocks and shares image by Andrew Brown from Fotolia.com
  
  Evaluate the possibility of a 100 percent capital loss. Do not trade binary calls when you cannot afford to lose trading capital.
  
  
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  Some binary options brokers advertise "no commissions." Read the fine print prior to buying binary call options.business bar charts and hundred dollar notes image by Elnur from Fotolia.com
  
  Recognize how commissions affect buying binary call options. These costs affect returns.