Fischer Black - Economist who helped co-found the Black-Scholes valuation model.
Fischer Black - Portrait Caricature Drawing
Although he did not get recognized by the Nobel prize committee till several years after his death, Fischer Black helped establish the needed math required for valuating binary options for trading. While this may seem like a mundane detail in the grand scheme of things, it is in fact a critical component of modern day investing.
A large component of investing in general is the ability to mitigate risk and grow profits. Buy low, sell high. Binary options change the rules of this common folklore by presenting the trader with 2 alternative options. The simplicity in the decision making process is useful as it might prevent the trader from taking a riskier trade that has a lower yield, while at the same time encourages safer trades while at the same time enabling proper gains making it worthwhile for both the trader and the brokerage firm.
With normal stocks and currency buying, you can basically make money when you accurately predict when the market will rise, and you reduce your losses by knowing when it will trend downwards. With modern day brokerage firms, they where able to do the above mentioned in addition to also being able to sell "short" meaning that if they accurately predict the decline of a stock, or indice, then the difference of that day could be converted into profit.
Binary options go a step further, allowing you to both make money on a bear and bull market, but they also allow you to take position that enable profit from a stagnant market or low-volatility market. Using the combination of all these tools means that a trader can pull in a steady income regardless of the markets condition, given that he or she is able to accurately understand the market and act upon that information. A well trained binary options trader is able to turn a profit whenever the markets behavior is somewhat predictable.
A large component of investing in general is the ability to mitigate risk and grow profits. Buy low, sell high. Binary options change the rules of this common folklore by presenting the trader with 2 alternative options. The simplicity in the decision making process is useful as it might prevent the trader from taking a riskier trade that has a lower yield, while at the same time encourages safer trades while at the same time enabling proper gains making it worthwhile for both the trader and the brokerage firm.
With normal stocks and currency buying, you can basically make money when you accurately predict when the market will rise, and you reduce your losses by knowing when it will trend downwards. With modern day brokerage firms, they where able to do the above mentioned in addition to also being able to sell "short" meaning that if they accurately predict the decline of a stock, or indice, then the difference of that day could be converted into profit.
Binary options go a step further, allowing you to both make money on a bear and bull market, but they also allow you to take position that enable profit from a stagnant market or low-volatility market. Using the combination of all these tools means that a trader can pull in a steady income regardless of the markets condition, given that he or she is able to accurately understand the market and act upon that information. A well trained binary options trader is able to turn a profit whenever the markets behavior is somewhat predictable.
Myron Scholes - Co-founder of the Black-Scholes Valuation Model for pricing binary option trades
Caricature Portrait of Myron Scholes
Binary options trading has really taken the investment world by storm in recent years. Although conceptualized in the 1970's and 1980's, and the topic of a 1995 Nobel Prize, the real action and volume has only come to fruition in the most recent years. A big part of the reasoning for such a late exposure to mass adoption has been that the complexity needed for calculating the value of a binary options was only enabled on a practical level with the current capabilities of computers and systems. The math and models that were created by Myron Scholes were used on a very strong system, most likely a super computer and it was almost 2-3 decades later before it was possible to trade such binary options online.
The key aspects to the Black-Scholes valuationare that if you can predict the accurate behavior of the market, then you can utilize that to gain capital, even if the market is loosing value, or worse, stagnation. There are also a few ways to use binary options to make very safe gains of 30% to 40% - by trading in close-able positions.
The most important detail that enables binary options trading to be a useful and successfully traded investment tool is that is is EASIER than regular forex, stocks or commodity trading. Without the proper technological advances, it was more complicated to trade binary options and as a result, they had to wait years before it became a feasible goal.
The key aspects to the Black-Scholes valuationare that if you can predict the accurate behavior of the market, then you can utilize that to gain capital, even if the market is loosing value, or worse, stagnation. There are also a few ways to use binary options to make very safe gains of 30% to 40% - by trading in close-able positions.
The most important detail that enables binary options trading to be a useful and successfully traded investment tool is that is is EASIER than regular forex, stocks or commodity trading. Without the proper technological advances, it was more complicated to trade binary options and as a result, they had to wait years before it became a feasible goal.
The often forgotten Robert Merton of the Black-Scholes-Merton Valuation
The term "Black-Scholes" was actually coined by Robert Merton, who was also the first to write a paper on the valuation formula and to expand on it to include a pricing model.
Some have even used the term Black-Scholes-Merton when referring to Black Scholes, specifically since Scholes and Merton are the ones who officially won the 1997 Nobel Prize for the formula, Fischer Blacks name was added posthumously as a result of it being his brain-child.
While his application of the formula is what brought the entire Black-Scholes formula to light, he still is not the inventor of the formula and hence his name is not typically applied or used. None-the-less, we felt it helps for you to have as much information on the topic as possible and hence have included his information as part of what is needed to explain the Black Scholes Model
Some have even used the term Black-Scholes-Merton when referring to Black Scholes, specifically since Scholes and Merton are the ones who officially won the 1997 Nobel Prize for the formula, Fischer Blacks name was added posthumously as a result of it being his brain-child.
While his application of the formula is what brought the entire Black-Scholes formula to light, he still is not the inventor of the formula and hence his name is not typically applied or used. None-the-less, we felt it helps for you to have as much information on the topic as possible and hence have included his information as part of what is needed to explain the Black Scholes Model