The Black-Scholes Flaw

Maze of Binary Options Choices

The Black-Scholes Valuation formula is unique in it's regard to how it calculates binary options for trading. It has several assumptions that are programed into the model and there-in lies the problem. One of the primary assumptions for the Black-Scholes model for trading binary options is that there is access to risk-free capital. For many years this simply meant that gov't bonds were needed to secure risk free lending for this portion of the formula. As of around August 2011, the US credit rating was lowered from AAA to AA+ - this lowering of the credit rating effect binary options in that now rather than borrowing at a risk free interest rate, they have to pay the higher interest rate of less-safe bonds. The trading of binary options goes on and functions as usual, but rather than using US bonds, they are using German, or European instruments.

Binary Options Trading Art - Maze of Fun Funnel

Fun Funnel Maze - Binary Trading Artwork

Maze of a funnel system, sort of like a pinched bulls eye. Made this while at the same time trading binary options online and utilizing my creative abilities to remain calm during busy trading periods. I think this little tip is one of the best ways to improve your game while trading binary options

A few people I have recommended this to have come back to me with questions about what to draw and how to better draw. While I do have some tips on that matter, they are missing the point. Its best to just draw what you enjoy so that you can remove some focus from the binary options trading, but don't over focus on the drawing as it can serve as too much of a distraction when you look at it that way.

Thanks to this source for the binary options trading art

Understand what are binary options.

There is an awful lot of information floating around the internet of tips for trading binary options. The thing is that while the information offered on such sites is accurate and true, it has to be used in conjunction with existing knowledge and experience with binary options trading, or the tips are not of much use.

To help you better use such tips for the next time you are trading binary options, you need to understand what is a binary option. We first need to take a step back and understand what is going on inside the computer's brain when you trade options on a binary platform.

The first thing to realize is that the system assumes that the market is frictionless and fractional, meaning they can buy and sell stocks with no commission, and that you don't have to buy an entire share, but rather a fractional amount of a share. These aspects are part of the Black-Scholes valuation formula and are the basis for trading binary options

Another aspect required by the Black-Scholes model is that it requires a risk-free ability to borrow money, meaning that there is no risk of loosing it, such as depositing it in a bank, and if the money is somehow lost it is insured etc, etc.