Binary Options Trading

What markets can you trade using binary options ?

Binary options, also known as digital options, are a very dynamic form of trading that strip away much of the complexity of traditional trading to allow for a closer control of risk, faster turnaround, and high potential profits. The basic idea behind digital options is that a trader purchases a contract on an underlying asset, predicting whether the value of that asset will increase or decrease over a fixed contract length. Contracts in digital options generally expire within one hour, so the turnaround time is very fast. Payouts are generally in the 155% to 180% range as well, and the potential for quick profit is a major draw for many people.

Unlike some instruments, in which the trader is actually purchasing the asset itself – although generally not for delivery, but rather to sell or buy at a later date to someone who will actually take it for delivery – digital options are simply contracts that are based on an underlying asset. The asset itself is not actually purchased, not even as a future. This has a number of benefits, one of which is that digital or binary options can use virtually any underlying asset as the basis for their contracts. This means that every major market could potentially have digital option contracts available for it. In practice there are a few major markets that are commonly seen used with digital options.

Forex

Perhaps the most actively traded market for digital options is the Forex market. Many people move to digital options from Forex day trading, and it is an easy transition to continue using the same underlying assets. At the same time, the Forex market is often easier to understand than the very nuanced commodities markets, and there is nearly always some major shift occurring in the world’s currency values, making it ideal for finding short-term contracts. Different digital option platforms offer different currency pairings, but generally all of the major benchmark pairs are included. The most common pairings available in digital option markets are: USD-RAND, USD-CAD, USD-JPY, USD-CHF, GBP-USD, AUD-JPY, EUR-USD, NZD-USD, EUR-JPY, EUR-CHF, EUR-GBP, and GBP-JPY.

Commodities

Commodities are widely traded as digital options as well, although the selection is generally limited to those commodities which see a lot of active movement. Most traders find purchasing digital option contracts on commodities somewhat more difficult than Forex pairs, simply because every commodity reacts to its own set of fundamentals. For example, while Oil might react very strongly to the price of the USD, and the global demand as indicated by the production strength of the world, Orange Juice reacts primarily to weather and natural events which impact the production of oranges, and therefore the overall supply. Many digital option trading platforms have a limited selection of commodities, but generally include at least: Oil, Gold, Silver, and Copper.

Stocks

Most digital option platforms also include contracts on a number of benchmark stocks. While the stock markets are large enough that platforms will not represent them especially well, most platforms try to get at least a handful of stocks from each of the major sectors of the market. For example, a common selection might include: Apple, Coca Cola, JPMorgan Chase, Microsoft, McDonalds, Barclays, Telefonica, and Johnson & Johnson.

Indices

Quality Binary Options brokers such as we list on this site offer a wide range of global Indices that you can trade using binary options.