Minute options are a specific type of CFD with a short expiration time, usually from 60 seconds to 5 minutes. When compared with regular CFD (expiration of 30 minutes or longer) they can be very risky. In such a short time period it is more difficult to predict the price development and the provided payouts are usually not so high.
Minute options (i.e. really short-term options with 1 to 5 minute expiration time) are generally not good for beginners. They are often promoted by brokers but it may be better for you to start with trading of CFDs with expiration of at least 15 minutes or even better 30 to 60 minutes.
Properties of minute options:
As is the case with other types of CFDs, when you buy a minute option, you always know the maximal possible loss (your deposit), you are speculating on the rise or drop of the underlying asset (currency pair, commodity, stock, index) and you know the expiration time. However the expiration time is very short in this case, just a few minutes.
Minute options fall under the category of CFDs so they also have a predefined fixed profix in the case of a good guess by the investor. After you pay the deposit (the option premium) there are just two possibilities of the result:
- Correct guess of asset rise or fall = a fixed payout.
- Incorrect guess = the investor doesn't get anything.
- Payout: The fixed payout is usually 70% of the deposit.
- Expiration time: Short, in tens of minutes.
- Loss: Maximal loss is limited by the deposit, i.e. the option premium.
- Result: For a trade to be successful, the price needs to move just a single point in the chosen direction.
- Strike price: The initial price level based on which the price at the moment of expiration is evaluated. When you buy an UP (Call) option of Google stock when it is valued at 105,25 USD, you are speculating on the rise of the stock and the strike price is 105,25 USD. You want the price of this stock to increase above the strike price.
Types of minute options:
- UP (Call) minute option: When buying an UP option, you expect the underlying asset to increase by at least one point against the strike price
- DOWN (Put) minute option: When buying an DOWN option, you expect the underlying asset to drop by at least one point against the strike price.
Advantages of minute options:
You know the result of the investment in just a few minutes
Disadvantages of minute options:
Lower payout - usually just 70% compared to 80% or 85% with regular CFDs
Less time for decision making
It is difficult to correctly predict the price development
Short term graphs (candlestick = 1 minute) are not very reliable
Short-term minute options are not an ideal choice for a beginner. Just a few minutes or even 60 seconds is a very short time to reliably predict price movement. These options are beneficial for the brokers, in some cases experienced traders can use them if they have very strong information about future price movement.
If you want to make a few quick test trades on a demo accounts, you can definitely try out minute options. However, if you are serious about trading CFDs and making oney, it will be better to focus on longer options with a normal expiration time (30 minutes and up). These will allow you to reach reasonable long-term profits.Make money in three easy steps!
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