Most binary options platforms, alongside currency pairs and commodities will also offer a good range of stocks for which these binary options can also be traded. Similar to all other forms of binary options, these offer those with expiry times ranging from a single minute to several weeks and can provide a very good alternative for stock day traders. The variations on binary options that are provided to stock traders include range and touch trading variations which have much higher in the money pay outs than standard binary options although also provide a riskier option, often lasting the duration of the week.
Knowledge required to trade stock binary options
Trading stocks using binary options requires some basic knowledge and the ability to understand the underlying concepts of fundamental over the technical elements of a chart. Whilst technical signals will often benefit binary options traders with their analysis of currencies and indices, stocks are not only interconnected to flows of market demand on a daily basis but they are also influenced by sentiment towards a particular company or sector. This means that, in order to trade binary options successfully, knowledge of particularly sensitive news releases, large shareholder deals and performance indicators or news impacting a particular industry.
Stock movements create profitable opportunities
Major factors that cause individual stock market movements can be broken down in to several broad areas. The first of these is general economic data releases relating to the economy. Generic data will show which stocks are quite simply hot and which are not. In the recent recession, experienced by much of Western Europe over the past two years, retail and consumer-orientated stocks which rely on people spending disposable income will be negatively affected. From this a further element to be considered with individual stocks is the possibility for government policies, taxes and restrictions on a key industry for a stock will also prove negative.
Additional, and highly important, factors to take in to account are the individual earnings reports of companies, and their relative price to earnings ratio in regards to this, as well as the potential for takeover bids and mergers within an industry. Whilst all of these factors are undoubtedly important for binary options traders looking to trade stocks consistently over a period of time, there are many traders who strip binary options on stocks down to one intra-day factor which is ‘the news’ and daily events causing short-term shifts in sentiment towards a stock.
Trading the news with binary options
News traders will typically look at the formal daily news releases of several blue-chip US, UK and European stocks (those with the highest liquidity at any one time) and wait for the market reaction when this information hits the market. Super-short-term binary options, such as the sixty-second markets are ideal for trading news spikes and the retrace caused by a panicked or over-excited market. Alternatively, for more conservative binary options traders, binary options which can be held for several hours, including those which can also utilise the ‘close early’ function, are ideal to make a speculative investment at the beginning of the trading day with a well-researched basis for the stock going one way or another one the release of news data.
Whilst individual stocks may suit those binary options trader who enjoy individual stock analysis and are prepared to apply additional research in to the idiosyncrasies of a company, many traders prefer to trade binary options based on the entire index. Index binary options trading allows investments to be made on the direction of a large group of stocks as a whole and is much less specific to the individual companies and reflects the large underlying sentiments that support global economies. The US stock market is a key factor in guiding many of the world’s stock indices and successful analysis of the sentiment towards the US economy can prove very rewarding for those interested in generating binary options profits from stock market trading.