There are quite a few differences when comparing binary options trading with future contracts. In fact, binary options trading and futures contracts tend to lure in very different types of investors.
With binary options, it is all about determining the direction that a particular asset will take when in terms of value. With futures contracts, however, there is an agreement taking place between a buyer and seller regarding an asset that may have yet to be produced.
As you can see, these are very different concepts and completely unlike one another. Here are more ways that binary options trading and futures can be differentiated from one another:
Amount of Investment
One of the reasons that binary options trading has increased in popularity is because it is very easy for most people to take part. This is because with even the smallest amounts of money, traders are able to place trades on certain options.
For instance, depending on the binary options broker chosen, certain individuals may be able to only deposit $10 as an initial amount. While the average tends to be around $100 to $250, it is still quite affordable to most individuals.
Futures and futures contracts, on the other hand, require a great deal more investment. As such, not everyone is able to take part in such contracts.
Often, it is investors with considerable capital who are able to make agreements regarding futures contracts. On average, you may require between $5000 and $10,000 simply to open an account. In certain instances, the initial startup may be even more than this.
With binary options trading, you do not require a great deal of patience. This is because the most common types of trades are ones that last between sixty seconds and five minutes. There are, of course, certain trades that may last for hours, days, or even weeks. These tend to be quite rare, nonetheless. In most instances, the trades are over within minutes.
Futures contracts, however, may take months or longer to expire. Sometimes, they may expire sooner than the intended date. Nevertheless, it is more common for them to run for a certain, longer period of time. As such, you will be unable to see an immediate gain in profit or income.
The Potential for Profit
One of the major disadvantages associated with futures is that investors have a tendency to lose out on profits. This is because the contracts are created dependent on the current conditions of the market.
However, as everyone is aware, these conditions can change quite drastically. Even if they moved in your favor, you will be unable to make a profit. This is because the contract has already been agreed to based on previously existing conditions.
With binary options, nonetheless, it is quite different. This is because you have the opportunity to observe and make note of certain patterns or trends. This way, if you notice that there is a particular potential for profit, you can place the trade. Thus, you are seizing the current chance that has presented itself.
These are just a few of the ways that these two financial activities are quite different from one another. These two options tend to be worlds apart and, similarly, tend to attract very dissimilar individuals as well.