Binary options are great because they combine many marketplaces in a single brokerage, making your trading routine a lot simpler. However, this can also create confusion for some because there will be many assets that you are completely unfamiliar with listed on your binary broker’s site. You should avoid trading these if you are unfamiliar with them, but that doesn’t mean that you should not learn about them. Learning how to trade new assets is a solid way to increase your knowledge and create new profitability opportunities.
There are four main asset types that binaries offer. Here’s a quick rundown on them. Remember that binary options do not give you ownership of an asset or any of the rights that go with ownership. Binaries represent the underlying asset and not any degree of ownership.
Trading the Stock Market
Stocks are common throughout the binary industry, but their country of origin will vary. For example, on some sites, you will find a United States focus, while other brokers might have an emphasis on Asian or European stocks. Stocks are basically representative of shares of ownership of a company. So, if you were to go to your local stockbroker and say that you wanted to buy a portion of Apple, the broker would ask you how many shares you wanted, and then charge you the current share price times the number of shares you were buying. This is not how binaries work with stocks. They look at the current market price, and then you are predicting what will happen within the timeframe you choose. If Apple is at $120, and you think it will go up to $120.10 in the next 15 minutes, you should buy a call option, for example.
Yes, Even Indices
These are the tools used to measure the health of a stock market. The U.S. has the Dow Jones Industrial Average and the S&P 500, England has the FTSE, Japan has the Nikkei 225, and so on. These are comprised of hundreds of individual companies sometimes, and their prices reflect the movements of the stocks within them as a whole. They are generally very good indicators of an overall economy’s health and are hard to trade short term, but are very consistent over the long term. For example, the Dow has gone up by a very rough average of 3 percent every year for the last 75 years. Binaries give you a chance to make big profits off of tiny changes with these without risking a lot, which is something that the traditional stock markets do not allow for.
Currencies are Most Widely Traded
The Forex market is actually the world’s single biggest marketplace, accounting for about $1 trillion of cash movement every day. It’s a huge market for sure, and it can be confusing because of things like leverage, spreads, and fees. Binary options simplify this and allow you to take a pair of currencies and just predict whether the price for them will go up or down. The euro and U.S. dollar are the two currencies that are traded most heavily, so a good place to start with these would be the EUR/USD pair. If you think the euro will go up in relation to the dollar, you would take out a call, or if you think the euro will drop in price by comparison, a put is the way to go. Both currencies could strengthen in theory, but you are essentially trying to find the one that will be stronger by the moment of your expiry.
Hot Commodities Give you Choices
These were always something that were unapproachable by the common trader, but binaries have made them easy to trade. These include things like oil, coffee, gold, and livestock. Not all brokers will carry a wide variety of commodities because they are not always that popular, but if you have knowledge of a commodity, trading it as a binary can create a lot of wealth that trading it as a futures contract would not ever allow for. This is one of the most underrepresented areas within the binary options world, and probably the area that has the biggest opportunity for profits in comparison to its original marketplace if you have the right knowledge set.
Bonds are in Play
You may find that a select few brokers offer bonds. Most people stay away from these as binary options traders, but there is a small opportunity here if you fall companies individually. For example, knowing that IBM has just set a record high in profits for a quarter could reveal that they will have lower bond rates because they will be focusing more heavily on selling stocks now. Little tidbits like this could give you an advantage if you ever stumble upon bonds within the binary options market.