Of all the financial assets available for trading in the markets, stocks are an asset with which most people are familiar. They have emerged since the formation of the first joint-stock companies at the end of the sixteenth and seventeenth centuries. For binary options, nowadays, equities also represent one of the derivative asset classes that are available for trading on any option trading platform.
Options are contracts that give the right to its owner to buy ( call options ) or sell ( Put Options ) an asset at a set price now ( Strike Price ). This right applies until a set time (Time to Maturity). Option pricing may not be possible analytically or analytical formulas are difficult to construct, requiring estimation methods.
Compared to traditional equity trading, binary options offer investors and traders flexibility in executing a financial strategy. In addition to this, trading ASX Index Options has several advantages:
The first evident for the binary trading of stock options, as opposed to action, is because it is affordable.There are ways in which Binary options are classified: derivative financial instruments whose values are themselves derived for the price of an underlying asset such as equities. When a binary trader buys a binary call or a put option, it only relates to an agreement between the trader and broker on contract basis. There is no transfer of ownership between real assets for the trader. As such, there is no need for the trader to pay the price of the total purchase of the underlying asset.
Binary option brokers like any option offer traders the ability to operate across a wide range of industries and markets from a single platform. If a traditional investor in the US wants to trade listed securities in Australian markets, he must register with a broker based in Australia before he can access shares listed on the Australian stock exchanges.
As the binary stock options are structured, a trader of binary stock-options must only be concerned with the direction of price movements and not their magnitude. This avoids having to do more research on the background of an action.
Aspects to be considered when trading binary stock options
To be able to properly trade binary stock-options, you must familiarize yourself with factors affecting prices such as:
This is one of the fundamental factors that affect the value of a company’s shares. One of the primary reasons why people are keen on investing on stock is to gain some profit from the stock they purchase. A better earnings ratio enhanced the chances of a dividend payment. Furthermore, a good report indicates that the company is profitable, which will improve its internal value. Thus, investors will want to invest in the company’s shares and therefore, will push up their price. Incidentally, a good report is not necessarily a good thing if the company is considered to be underperforming its previous earnings.
Market sentiment refers to its overall “tone”, but also to how investors feel about a security. This will result in lesser demand for securities, then to a drop in their prices.