Binary Options – trading indice
Indices such as the largest stock markets are made up of a certain number of individual companies and are one of the best ways to trade binary options. Whilst an individual company on the FTSE 100, the UK’s top loo share index, may fluctuate wildly on any single day, the index combines the movements of all those 100 companies. These are great to trade with binary options as they reflect the sentiment of the market as a whole, often moving in a direction early and maintaining this through the day. Using binary options features such as “one touch” with indices can be a profitable strategy if the correct market sentiment is pre-determined.
One of the most popular binary options strategies for trading indices it to purchase options based on the performance of the previous time zone indices. In the UK and Europe this follows on from the Chinese and Japanese markets that often set the tone for any fundamental elements driving the markets higher or lower. Taking advantage of the time differentials within a region can also be beneficial to binary options traders who may see the German DAX jump 50 points before the FTSE100 has even opened. The fact that this positive move only needs to translate to a 1 point move higher for a purchased binary option to become profitable makes this a very attractive strategy.
The fact that indices are moved by large shifts in sentiment makes them ideal markets for news traders to gain an edge. Trading indices immediately after the release of news events is often cautioned by some due to the heightened volatility but for short-term binary options purchases these can provide good opportunities. Stock indices are very sensitive to the fundamental issues affecting the companies that they are comprised and this is where binary options traders can take advantage. The correct interpretation of the outcome of an interest rate decision, a natural disaster or a shock release of earnings can all cause the indices to move immediately after and in the period following this.
Binary options traders can also benefit from information which may suggest that an index is oversold or overbought in very much the same way that forex or stocks are analysed. The use of simple data such as the average range of the index will notify that the purchase of options in the opposite direction is likely to be a profitable opportunity. The ability to close a profitable position early also makes binary options flexible to news events which may see a profitable position slip in to a losing one. With the average payout of most binary options index trades being around 80% the return on a close-early request will be significantly lower but importantly still profitable.
Indices are an excellent way to move away from the volatility of the forex markets and to purchase binary options based on the views of 100 individual companies. The end result of this, which may be beneficial to some binary options traders, is the tendency for indices to move at a steadier pace and also to follow a logical pathway through news and events.
Eleonora Marchetti is an expert on financial markets specializing in foreign exchange and trading in binary options. An honorary graduate of the SDA Bocconi School of Management in Italy, she provides consultation services to various economic powerhouses, including the globally renowned binary options trading firm, Banc De Binary.