Binary options refer to over-the-counter contracts, which means freedom of choice and interpretation of the form of conditions and the list of underlying assets. Therefore, despite the stereotypical connection of these tools with currency pairs, as assets for binary contracts can be stocks and futures or exotic events: weather and political elections, referendums, etc.
The list of underlying assets depends on the capabilities and desire brokers.
Specialized companies provide a wide range of tools, up to exotic bets and random indexes that allow trading on weekends.
Investments in exchange-traded binary options differ from contracts with underlying assets in the form of exotic bets on "red and black", the possibility of economic forecasting and systematic profit. The task of a trader is to choose the market assets that are most susceptible to certain patterns.
For example, it can be energy carriers or commodity assets (agricultural crops), quotes of which are related to seasonality. In times of crisis, binary options on protective instruments or currency pairs of individual states may be of particular interest in case of local internal political problems that cause devaluation.
The vast majority of types of binary options need price trends that increase the probability of quotes "moving away" from the entry point or exit from the range, touching certain levels. Therefore, when choosing the underlying assets of a certain type (currencies, metals, commodities, stocks, etc.), the trader should be guided by liquidity.
For example, in the currency class, the highest trading turnover is in the pair EUR/USD, in metals - gold, which means more frequently occurring trends, such as the reaction of quotes of these instruments to any world events.
Binary options, depending on the underlying asset, have certain features.
Binary options on stocks
Stock market shares, in addition to the impact fundamental factors? they react to corporate news, which gives more opportunities and advantages for strategies buying binary options on news. Trends securities can have a number of patterns-seasonal for agricultural enterprises or industry, political, "dividend stories".
A wide range of tools allows hedge risks by typing a portfolio of various instruments. By buying binary contracts for securities from different sectors of the economy, you can diversify the option strategy, increasing the probability of obtaining a final profit.
Brokers Forex and binary options independently took care of the liquidity of the list of shares, offering securities only of large enterprises, multinational corporations, many of which are known around the world.
Binary options on stock indexes
The world stock exchanges in the XX century applied the index principle of measuring the economic activity of issuing enterprises. Each platform has its own methodology for calculating this parameter in relative units, based on the rates of "blue chips" - shares of enterprises, flagships of the industry.
On the basis of stock index quotes, futures are traded, the purchase and sale of which is, in fact, an investment in a conditional portfolio collected by the exchange. Traders purchase binary options on these futures for the same "portfolio reasons". In addition, stock indices of developed economies have long periods of steady growth, so long-term binary options "Above/Below" bring profit more often than other types.
Within the exchange, industry indices are issued that allow hedge the risks of unprofitable binary options transactions on stocks or diversify trading by buying contracts from different sectors of the national economy.
Binary options on raw materials
Binary options are purchased as insurance for open positions in underlying assets. Despite the predicted price movement, based on seasonality, there is often a force majeure factor in the markets of these goods: drought or military operations in the Middle East (oil) and Africa.
Commodity traders are well-versed in the patterns of seasonal price movements, so trading of such a class of underlying assets and options on them is highly specialized. Also, bidders exploit the effect of correlations of underlying assets in commodity groups, buying binary options on discrepancies for reasons arbitration or pair trading strategies.
Binary options on the Forex currency market
Binary options on Forex currency pairs are the most popular asset, due to high liquidity and availability of understanding of the nature of exchange rate fluctuations, based on national currencies. Unlike direct currency transactions, options make it possible to control losses, avoid "sitting out" in transactions limited by the expiration time.
Most novice traders get acquainted with the exchange through the Forex market, losing funds due to emotional unpreparedness. Binary options on currency pairs help a beginner to cope with these problems more easily, since the amount of loss is equal to the investment in the contract and is known in advance, and the terms of the transaction are often unchanged.
Professional traders "exploit" the patterns of low volatility of currency pairs that fall at certain intervals of time to increase the profitability of strategies for the type of options of the "Inside the range" type.