Online Trading: Features of American and European Binary Options

Online Trading: Features of American and European Binary Options

Posted by on Oct 12, 2016 in Blog |

Online trading like binary options 24option has gone its way to get the interest of traders. Binary options became very attractive because of its advance features and the offers it has to traders. These offers are not limited to types of options which the traders can pick that best suit their needs. Example of these options is European and American options. Both of which has special features that allows traders to get the most out of their investment. And don’t forget to read to study binary options. Meanwhile, the advantages and disadvantages under these two types of options have not something to do with its geographical location. Here are features of European and American options that you have to consider before having a contract.

Analyzing with Digital Tablet

Where the trading happens. The type of options under binary options do have particular place where it can be traded. This is either online or over the counter. The trading scheme of European options happens over the counter as specified by the rules of binary options. On the other hand, American options can be traded on the usual online scheme. The place where it is traded doesn’t affect the rules of the options.

Opportunities of owner. Under European options, the security of an asset can either be bought or sold by the owner of the option. This means that the owner has the right to buy or sell the asset on its strike price but he isn’t obliged to do so. This transaction can only be done on the day of expiry. Hence, the owner of can only exercises his right or opportunity on the last day of the contract. Contrarily, in American option the owner can enjoy the opportunity of buying or selling the security underlying an asset at its current price or strike price all throughout the period when it was purchased and on the expiry.

Advantages. European option offers simplicity and hassle free to traders who are willing to invest in binary options. This type of trading allows the trader to have peace of mind until the date of expiry. The owner can decide if he has to buy or sell the security of the asset on the expiry date. Another advantage of European option is that you can sell the ownership of the option if you think it the investment is not worth the time and profit. In this way, the contract will be opened to another interested trader and the deal with you will be closed. On the other hand, American options offer you opportunities like you can buy or sell the asset on its strike price from the day you had the contract until the expiry date. The advantage here is that you can make a deal on the date where the price of the stock is high (along the period of contract) and that you can gain more profit out of it. Hence, the cut off dates of week-long contract under American options is on Friday while the month long could still be enjoyed until the third Friday of the month.

Disadvantages. Every choice always has the cons which anyone should consider before putting a bet on an online trading scheme. European options offers limited opportunities as the rights can only be enjoyed on the last day of contract. This means that you cannot make a profitable deal when the strike price of the stock goes up on a specific date along the contract. The cons of American options are that it doesn’t always guarantee you that the strike price of a stock will go up on that period of contract.

Online trading offers a lot of features that best fit the needs of traders. And binary options got these choices for you. It offers different types of trading scheme like European and American options which has similarities and differences that you can consider depending on your preferences and needs. Say if you want to do the trading over the counter, and then opt for European options. Otherwise, if you want convenience on your own time, choose American options. Opportunities offered on European options are limited to the date of its expiry- which means you can enjoy your rights on the last day of the contract. This privilege is buying foryou or selling the security of the asset to another trader. American options offers you advantages such as buying or selling the security of the asset all throughout the contract period, thus you can gain more profit out of it specially when its strike price go up on along the period. Disadvantages of these two types of binary options should be considered before you jump on having contract on its options. European option does not allow you to buy or sell the security of the asset but on the date of its expiry. While American option does not guarantee you the strike price of the asset will go up as you can gain profit.