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What Are Binary Options?

Binary options are deceptively simple to understand, making them a popular choice for low-skilled traders. The most commonly traded instrument is a high-low or fixed-return option that provides access to stocks, indices, commodities and foreign exchange. These options have a clearly stated expiration date, time and strike price. If a trader wagers correctly on the market's direction and price at the time of expiration, he or she is paid a fixed return regardless of how much the instrument has moved since the transaction, while an incorrect wager loses the original investment. The binary options trader buys a call when bullish on a stock, index, commodity or currency pair, or a put on those instruments when bearish. For a call to make money, the market must trade above the strike price at the expiration time. For a put to make money, the market must trade below the strike price at the expiration time. The strike price, expiration date, payout and risk are disclosed by the broker when the trade is first established. For most high-low binary options traded outside the U.S., the strike price is the current price or rate of the underlying financial product. Therefore, the trader is wagering whether the price on the expiration date will be higher or lower than the current price.

Risk and reward are known in advance, offering a major advantage. There are only two outcomes: Win a fixed amount or lose a fixed amount, and there are generally no commissions or fees. They're simple to use and there's only one decision to make: Is the underlying asset going up or down? In addition, there are also no liquidity concerns because the trader doesn't own the underlying asset and brokers can offer innumerable strike prices and expiration times/dates, which is an attractive feature. The trader can also access multiple asset classes anytime a market is open somewhere in the world. On the downside, the reward is always less than the risk when playing high-low binary options. As a result, the trader must be right a high percentage of the time to cover inevitable losses. While payout and risk will fluctuate from broker to broker and instrument to instrument, one thing remains constant: Losing trades will cost the trader more than she/he can make on winning trades.

What is Mining?

Bitcoin is not regulated by a central authority. Instead, bitcoin is backed by millions of computers across the world called “miners.” This network of computers performs the same function as the Federal Reserve, Visa, and Mastercard, but with a few key differences. Like the Federal Reserve, Visa, and Mastercard, bitcoin miners record transactions and check their accuracy. Unlike those central authorities, however, bitcoin miners are spread out across the world and record transaction data in a public list that can be accessed by anyone, even you. When someone makes a purchase or sale using bitcoin, we call that a “transaction.” Transactions made in-store and online are documented by banks, point-of-sale systems, and physical receipts. Bitcoin miners achieve the same effect without these institutions by clumping transactions together in “blocks” and adding them to a public record called the “blockchain.” When bitcoin miners add a new block of transactions to the blockchain, part of their job is to make sure that those transactions are accurate. (More on the magic of how this happens in a second.) In particular, bitcoin miners make sure that bitcoin are not being duplicated, a unique quirk of digital currencies called “double-spending.” With printed currencies, duplicating money isn't an issue. Once you spend $20 at the store, that bill is in the clerk’s hands. With digital currency, however, it's a different story. Digital information can be reproduced relatively easily, so with bitcoin and other digital currencies, there is a risk that a spender can make a copy of their bitcoin and send it to another party while still holding onto the original. Let's return to printed currency for a moment and say someone tried to duplicate their $20 bill in order to spend both the original and the counterfeit at a grocery store. If a clerk knew that customers were duplicating money, all they would have to do is look at the bills’ serial numbers. If the numbers were identical, the clerk would know the money had been duplicated. This analogy is similar to what a bitcoin miner does when they verify new transactions. With as many as 600,000 purchases and sales occurring in a single day, however, verifying each of those transactions can be a lot of work for miners, which gets at one other key difference between bitcoin miners and the Federal Reserve, Mastercard, or Visa. As compensation for their efforts, miners are awarded bitcoin whenever they add a new block of transactions to the blockchain. The amount of new bitcoin released with each mined block is called the "block reward." The block reward is halved every 210,000 blocks, or roughly every 4 years. In 2009, it was 50. In 2013, it was 25, in 2018 it was 12.5, and sometime in the middle of 2020 it will halve to 6.25. At this rate of halving, the total number of bitcoin in circulation will approach a limit of 21 million, making the currency more scarce and valuable over time but also more costly for miners to produce.

What Is Forex Trade?

Foreign exchange, more commonly known as Forex or FX, relates to buying and selling currencies with the purpose of making profit off the changes in their value. As the biggest market in the world by far, larger than the stock market or any other, there is high liquidity in the forex market. Therefore, the forex market attracts many traders, beginners and experienced alike. With approximately $4 trillion USD traded in the market every day, the forex market has the highest liquidity in the world. Basically, this means that one can buy almost any currency he wishes in high volumes while the market is open. The forex market is open 24 hours, 5 days a week – Monday to Friday. Trading begins with the opening of the market in Australia, Asia, Europe to follow and then the USA until the markets close. The forex market start time during the summer is on Sunday at 9:00pm GMT, and ends at 9:00pm GMT on Friday. In the winter it’s 10:00pm-10:00pm accordingly. That results with currencies being traded at all times, day or night. Unlike some other instruments, where a downfall of the market would leave traders with untradeable assets, the forex market can always find a buyer or a seller. There are hundreds of currencies in the world, and each has a three letter symbol. American Dollars are USD, Euros are EUR, Swiss Francs are CHF, British Pounds are GBP and onwards to all the currencies. Currencies are divided into two main sorts – Major currencies and minor ones. The major currencies are derived from the most powerful economies around the globe – the US, Japan, the UK, the Euro Zone, Canada, Australia, Switzerland and New Zealand. Together with the other currencies they create forex pairs.

What Is Commodity Market?

Commodities, whether they are related to food, energy or metals, are an important part of everyday life. Anyone who drives a car can become significantly impacted by rising crude oil prices. The impact of a drought on the soybean supply may influence the composition of your next meal. Similarly, commodities can be an important way to diversify a portfolio beyond traditional securities – either for the long term or as a place to park cash during unusually volatile or bearish stock markets, as commodities traditionally move in opposition to stocks. It used to be that the average investor did not allocate to commodities because doing so required significant amounts of time, money and expertise. Today, there are several routes to the commodity markets, some of which facilitate participation for those who are not even professional traders. There are still multitudes of commodities exchanges around the world, although many have merged or gone out of business over the years. Most carry a few different commodities, though some specialize in a single group. For instance, the London Metal Exchange only carries metal commodities, as its name implies. In the U.S., the most popular exchanges include those run by CME Group, which was formed after the Chicago Mercantile Exchange and Chicago Board of Trade merged in 2006 (the New York Mercantile Exchange is among its operations), the Intercontinental Exchange in Atlanta and the Kansas City Board of Trade. Commodity trading in the exchanges can require standard agreements so that trades can be confidently executed without visual inspection. For example, you don't want to buy 100 units of cattle only to find out that the cattle are sick, or discover that the sugar purchased is of inferior or unacceptable quality.

Types of Investment Commodities

Today, tradable commodities fall into the following four categories:
  1. Metals (such as gold, silver, platinum, and copper)
  2. Energy (such as crude oil, heating oil, natural gas, and gasoline)
  3. Livestock and Meat (including lean hogs, pork bellies, live cattle, and feeder cattle)
  4. Agricultural (including corn, soybeans, wheat, rice, cocoa, coffee, cotton, and sugar)

What is Bond Market?

The bond market – often called the debt market or credit market, is a financial marketplace where investors can trade in government-issued and corporate-issued debt securities, Governments typically issue bonds in order to raise capital to pay down debts or fund infrastructural improvements. Publicly-traded companies issue bonds when they need to finance business expansion projects, or maintain ongoing operations.

  1. The bond market broadly describes a marketplace where investors buy debt securities, that are brought to market by either governmental entities, or publicly-traded corporations.
  2. National governments generally use the proceeds from bonds to finance infrastructural improvements and pay down debts.
  3. Companies issue bonds to raise capital needed to maintain operations, grow their product lines, or open new locations.
  4. Bonds are either issued on the primary market, which rolls out new debt, or on the secondary market, in which investors may purchase existing debt via brokers or other third parties.

The bonds market is broadly segmented into two different silos: the primary market and the secondary market. The primary market is frequently referred to as the "new issues" market, in which transactions strictly occur directly between the bond issuers and the bond buyers. In essence, the primary market yields the creation of brand new debt securities, that have never-before been offered to the public. In the secondary market, securities that have already been sold in the primary market, are then bought and sold at later dates. Investors can purchase these bonds from a broker, who acts as an intermediary between the buying and selling parties. These secondary market issues may be packaged in the form of pension funds, mutual funds, and life insurance polices, among many other product structures.

Types of Bond Markets

The general bond market can segmented into the following bond classifications each with its own set of attributes.
  1. Corporation bonds: Companies issue corporate bonds to raise money for a sundry of reasons, such as financing current operations, expanding product lines, or opening up new manufacturing facilities. Corporate bonds usually describe longer-term debt instruments that provide a maturity of at least one year.
  2. Government bonds: National-issued government bonds entice buyers by paying out the face value listed on the bond certificate, on the agreed maturity date, while also issuing periodic interest payments along the way. This characteristic makes government bonds attractive for conservative investors.
  3. Municipal bonds: Municipal bonds, commonly abbreviated as "muni" bonds, are locally issued by states, cities, special-purpose districts, public utility districts, school districts, publicly-owned airports and seaports, and other government-owned entities, who seek to raise cash to fund various projects.
  4. Mortgage-backed bonds: These issues, which comprise pooled mortgages on real estate properties, are locked in by the pledge of particular collateralized assets. They pay monthly, quarterly or semi-annual interest.

What Is a Market Index?

A market index is a hypothetical portfolio of investment holdings which represents a segment of the financial market. The calculation of the index value comes from the prices of the underlying holdings. Some indices have values based on market-cap weighting, revenue-weighting, float-weighting, and fundamental-weighting. Weighting is a method of adjusting the individual impact of items in an index. Investors follow different market indexes to gauge market movements. The three most popular stock indexes for tracking the performance of the U.S. market are the Dow Jones, S&P 500 and Nasdaq Composite. In the bond market, Bloomberg Barclays is a leading provider of market indexes with the U.S. Aggregate Bond Market Index serving as one of the most popular proxies for U.S. bonds. Investors cannot invest directly in an index, so these portfolios are used broadly as benchmarks or for developing index funds. arket indices measure the value of a portfolio of holdings with specific market characteristics. Each index has its own methodology which is calculated and maintained by the index provider. Index methodologies will typically be weighted by either price or market cap. A wide variety of investors use market indices for following the financial markets and managing their investment portfolios. Indexes are deeply entrenched in the investment management business with funds using them as benchmarks for performance comparisons and managers using them as the basis for creating investable index funds.