This section of the site looks into options trading and offers education articles.
Forex options is the safest way to protect yourself while trading in the foreign exchange market. Usually when trading Forex you would exchange one currency for another ie. GBP/USD: exchange the British pound for the US dollar.
Trading Forex Options though gives you the right to set the date and price of a forex trade to some point in the future but not the obligation to do so. So if the market goes against you can back out, and all you’ll lose is the premium you paid to the seller/broker.
The Commodity Options markets are becoming more and more attractive to investors, as you can see by the increasing amount of exchange traded funds based on them. Commodity Option trading can be a great way to approach the commodities market as it offers relatively lower risk than other approaches to the commodities market.
A commodity is a product that can be traded on an authorized commodity exchange and are split into five categories:
Grains – These are Oats, Corn, Rough Rice, Wheat and Soya beans
Energy – These are Crude Oil, Natural and Unleaded Gas and Heating Oil
Softs – These are grown commodities – Coffee, Lumber, Cotton, Sugar, Orange Juice and Cocoa
Metals – These are Copper, and the precious metals of Gold and Silver
Livestock – These are Lean Hogs and Live Cattle (pork and beef)
Stock options are investment options enabling the purchaser the right, but not giving the obligation, to purchase (known as Call) – or sell – (known as Put) – a stock at a specified price within a specified time period with an expiry date. There are two types of stocks options – the American and the European – with American options exercisable anytime between the date of purchase and the expiration date. However, European options are only redeemable at the date of expiration. By far, nearly all exchange traded stock options are of the American kind.
The appeal of stock options to investors is down to the fact that the losses are limited to the amount that is paid for the stock options should the underlying stock price go in a direction that is against their prediction. The profit potential for gains in stock options are however, theoretically unlimited. It is also important to note that the premium for a stock option is far less than the cost of the actual stock itself; especially in the case of a high priced stock like Apple Inc. This enables the investor to leverage their capital in a far more efficient manner.
Index Options are options, which give the buyer the right but not the obligation to purchase an option derived on an index, such as the DAX or Nikkei 225, as opposed to being a hard asset or a stock. It is simply a number that represents the performance of a group of stocks. They appeal to investors because they are a good diversification investment as indices suffer less from individual risk, like a company doing badly when single company stocks are purchased, or secondary risk, where an industry is not doing so well.
This particular strategy is one that is attractive to investors trading on the belief that a particular world index, like the UK’s FTSE, will make a major shift in one direction, but is unsure in which direction the move will go – either up or down. It would also appeal to investors seeking to benefit from the leverage that index options have the potential to offer.
Forex Options remain popular to a variety of different investors; from professional investors using forex options in times of important reports or events when the risk and spreads increase in the cash forex markets to the smaller and newer investor with a limited amount to invest. Other profit motivated forex traders use forex options as an alternative to cash simply because they are cheaper as well as options positions have the potential to generate a lot more profit than the same amount in a cash position.
Forex Options are used in a number of different methods, but essentially they are used for: (a) to capture profit or (b) to hedge against existing positions. An option provides you with the right, without the obligation to either buy – placing a Call Option, or sell – placing a Put Option – on a currency pair at a particular price – the strike- at a certain date. A premium is paid upfront to the seller of the option for the right to buy or sell the currency pair. The market conditions at the time the forex option expiry will dictate whether or not you decide to exercise this right.
Using the most traded currency pair – the EUR/USD, lets say that you have purchased the right (the option) to buy EURUSD on or before the date of the 10th July at the price of 1.0532,.
Who said you need thousands of dollars to trade in the forex market?
Thanks to the internet, instantaneous placing of call and put options is now possible. Hence, most binary options contracts have short term expiration so you can see how much profit you received in a matter of hours. Also, trading is so much simpler since you won’t need highly sophisticated tools to determine the level of price change, instead, you only have to predict whether the value of a currency will increase or decrease. Even with a 0.0001 change in the price of the currency, you can now receive as much as 81% payout!
The great thing about stock options is that investors can choose from a number of stock trading strategies which are proven to make profit. Some of the most popular trading strategies used today involve day trading or the act of buying and selling stocks within the same day. Essentially day traders gain profit by using huge amounts of capital and betting on highly liquid stocks.
For day traders, it is important to understand the market thoroughly in order to take advantage of the small price movements. A typical day trader considers two factors: the liquidity and volatility of the stock. If a stock is liquid, an investor can enter and exit a position at a good price. On the other hand, volatility ensures price movements – the more volatile the stock is, the greater the chance to profit is. Of course, it is also important to keep in mind that higher volatility means higher risk.
With the economy failing to stabilize, commodities options trading is becoming an important financial market because it is relatively low risk compared to the other markets. One of the common strategies used in commodity option trading is scale trading. Often referred to as a “can’t lose” strategy, but in reality, it is only as good as the trader using it.
For many investors, forex options trading present a great way to increase profit as well as minimize risk to their portfolio. Most market participants involved in hedging (the act of minimizing risk) are corporations which are engaged in import and export and would like to secure future exchange rates. On the other hand, speculators (investors seeking to increase profit) use forex options to profit in both trending and ranging markets.
Perhaps surprisingly, the forex options market has grown to be the largest option market in the world, overtaking stock options by far. With stocks you can buy and own the stock therefore it seems unlikely to trade with stocks when you won’t actually take possession of them. Forex however is classically quite complicated to trade and understand while forex options have limited steps in order to trade them with predetermined risk and profit.
Index options trading were introduced into the financial market in 1981. Similar to equity options which are based on an underlying stock, index options are based on an underlying financial index.The main advantage of trading in index options is that it allows an investor to be diversified to the overall market or a sector of the financial market with just a single investment decision and one transaction.
Without index options trading, an investor will have to make several transactions to have the same level of diversification to the financial market.
It is a known fact that the forex market is a very lucrative market. There is a lot of money to be made by just trading currencies from the comfort of one’s home. Having said that, it is also known that to achieve consistency in profitability in forex requires immerse amount of prior preparations in the sense that you need a solid background in forex education and a reliable set of trading tools.In addition, to be able to profit from any trading scenarios, you have to know the DIRECTION of the market movement and the EXTENT of the price movement.
A Commodity Option gives a buyer the right to buy or sell a certain commodity at an agreed price (also called the strike price) and a set time in the future or before.
The buyer pays a premium for this to the seller or to the broker. The buyer is not obligated to exercise this contract however if they do not choose to follow then through then they can leave it and allow the contract to expire.
By looking at the past and using technical analysis including historical charts and data the buyer can start to build a better picture and projection of the future.
Metals- Silver, Gold, Platinum
Energies- Oil, Ethanol, Gas
Grains- Wheat, Corn, Soybeans
Softs-Sugar, Cotton, Lumber
With commodity options trading, an investor has the opportunity to make money from both ends of the market, be it a bearish one or a bullish one. Basically, with a commodity option, the holder of the option is able to buy or sell commodities like wheat or soya at a specified future date. The investor will purchase a ‘Put’ option if he thinks that the price of the commodity will drop.
On the other hand, if he thinks that the price of the commodity will rise, he will purchase a ‘call’ option. The best part of the transaction is that the investor does not have to take actual delivery of the commodity to profit from the trade.
Commodity options trading are conducted through a brokerage firm by using the Chicago Board Options Exchange (CBOE), the busiest and largest exchange in the world. Prior to 1973, before the opening of the CBOE, an investor was limited in his choice of financial assets to invest in. He could only trade with instruments like Bonds or Stocks that are traded over the other exchanges like the New York Stock Exchange (NYSE).
For many investors, stock options are regarded as a substitute financial instrument to buying the underlying stock itself. This is because investors can use also use stock options to bet on the movements of the stock’s price just like they are holding the actual stock itself. Nevertheless, we have to take note that there are major differences between a stock and its option. One of the main differences is that when you purchase a stock, you owe a piece of the company which issue the stock. On the other hand, when you purchase a stock option, you are just given the ‘rights’ to buy or sell the stock of a company at a certain price. The question of ownership in a company does not arise with owning stock options.
By agreed definition, forex options trading are a contract between two parties, a buyer and a seller, in which the buyer possess the right to buy or sell, but not the legal obligation, a certain amount of a particular currency against another specified currency at a fixed price called the ‘strike price’ on or before the expiry of the option contract. For this privilege, the buyer of the option will pay the seller a one-time lump sum called the ‘premium’.
Index Options enable investors looking to expose themselves to the whole financial market or to segments of the market with a single investment. The investor can agree a contract with a seller such as a brokerage firm, to buy an underlying asset at a set date in the future at a set time. The buyer, however can exercise their option not to go through with the contract and they can let it expire. They pay a premium to the seller to get this right. If they decide to follow through and buy the asset the seller is obliged to sell.
Stock indexes such as the NASDAQ, the FTSE 100 the top 100 companies listed on the Financial Times Stock Exchange, the FTSE 500 which is the top 500 companoes listed or the French exchange; the CAC.
Strategy is crucial in order to win any kind of battle. Even if this is a real war we are talking about or financial battles at your preferred trading platform, strategy is important in order to maximize profits while putting losses at a minimum. This is the only way traders will survive in this kind of venture and they will have to learn the secrets of doing so. And in binary options trading, the ways to do just this is not a secret anymore. Simply called options trading strategies, any traders will be better off knowing these choices.
Stock Options (or share options as they are called in the UK) are a great way to invest in the stock market. With stock options, the buyer of the stock engages in a contract with the seller which gives him the right to buy stock at a particular time at a set price in the future.
1. With stock options the buyer can decide to let the contract expire without purchasing the stock, in which case he’ll only lose his premium; a small fee or cost paid for the right to take a stock option.
2. If the buyer decides to buy (call) the stock the seller is obligated to sell to him. If the buyer decides to sell (put) the stock the seller on the side of the deal is obligated to buy, as per the contract.
3. Most options are American exchange -traded. In America options can be redeemed at any time between the time of purchase of the contract and the expiration date of the contract. In Europe, however, the option can only be exercised at the date of expiration.
Stocks are representative of the capital invested in a particular company. People who own stocks generally earn from it because it represents value and their income is derived via traders in the stocks market. With the market only serving as a medium, the transaction does happen between companies and traders: both of them losing or gaining something at the end of the an hour.
“Writing” stocks options mean that the trader now opens the stocks for the trade. In exchange with the agreed upon premium before the trading happens, people will invest in a particular stock, predict whether it will be a put or a call and either earn or lose money from the 1 or 24-hour trading time.
Anyoption is recognized as the top binary options broker today. Through binary options trading, investors can now enter fixed return contracts allow greater flexibility for traders to test out their strategies through a number of assets which they can trade including stocks, currency, commodities and indices.
With a wide range of contracts to choose from, Anyoption allows traders to diversify their portfolio thereby decreasing their risk.
Written by Binary Option Strategy Analyst David Ben-Asher
Investors generally buy gold as a safe haven against economic crises such as inflation and political or social unrest. Throughout history gold has always been a standard of value and away for foreign trade to flourish. Investing in Gold is usually a long term investing. An ounce of gold purchased in 2000 for $272 in now worth more than $1120. A quick look at the Dow/Gold chart shows an upward major trend in recent months.
Today, many people all over the world are getting attracted to option trading. You must have seen a lot of banners and visited various links that directly or indirectly relate to option trading. Although there is tremendous scope for earnings in option trading, it is advised time and again that options traders must play in long options rather than short options which are very risky. Now, the question which remains to be answered is that whether this advice is a good one which saves you money or is it a bad advice that will prevent you from earning profits?
When you get involved in commodity options as a trader, you need to make sure that before you do take the plunge, that you hold some basic knowledge, so that the journey ahead will be a smooth one and will make you mentally prepared for the high’s and low’s which are a part of the commodity options game..
Commodity options are a way for a trader to sell or purchase a commodity at a certain pre-designated price at a particular time in the future.
Options trading has become the most popular form of trading in financial circles today. Thanks to the various ways by which option trading provides many alternatives to trade over the simple trading in equities or other commodities. But many of the traders are not aware of the advantageous positions of options trading and therefore are not aware of the potential of this form of trading in helping them make good profits.
A novice trader might be aware of how to trade options but simply exercising the right to buy or sell stocks is not the only choice that option trading provides. In fact option trading also provides the ability to trade stock options. But the fact must be kept in mind that trading options is not a get-quick-rich scheme where one can just buy the options and then trade them to make profits. True, huge profits can be made while trading options, but at the same time many traders lose a lot of money too.
Option trading today has probably become the most popular form of trading and we see the continuous surge of new traders entering this market. Although a little complex than the simple stock trading, option trading has the potential to bring in huge profits but at the same time, not to forget, huge losses if things do not go the predicted way. Therefore with calculated risks, traders can reap in profits if they have the complete knowledge and understanding of the option trading market. Here we would discuss the various types of option trading.
Stock market seems a lucrative term for those persons who want to earn good profits and in short period of time. However, it is not that easy to earn money in the stock market. You should take the decision of investment with great care. Stock market is always unpredictable and therefore you should take your decision wisely. For the newcomers in the stock market, this market is full of risks. In case you don’t have knowledge about the stock market and its trends and if your decision does not turn out to be right then you can lose your hard earned money that you have invested in the stock market.
Option trading is a way of trading which is speculative in nature and has a risk of element involved. An option can be defined as a contract under which the buyer has the right but not any obligation to buy or sell an underlying asset which could be stock, indices or currencies, at a specific predetermined price on or before a certain fixed date. An option is considered a security just like a stock or bond. The terms and properties under the trading options contract are properly defined and are binding.