Trading stock binary options takes some understanding of how stocks behave in order to profit from it. Stocks constitute one of the asset derivatives that can be traded on the binary options market.
In order to trade stock binary options, traders must be conversant with the factors that cause movement in stock prices. 1) Market sentiment: if there is a gloomy market sentiment and worry about the global economy, most investors will prefer to hold cash and will sell their stock holdings, leading to a fall in stock prices. 2) Earnings reports: A good or bad earnings report will cause a stock price to rise or fall respectively.
The first step is to identify in what direction the stock is likely to head after a news release affecting the share price of the company in question. If there is a particularly strong news release that is likely to cause the share price of a company to spike in any direction, the trader can decide to trade any of the high-yield option varieties.
Usually, a trader will have access to trade hundreds of stocks, as brokers will list several stocks from the different stock exchanges across the world. From there, the trader is free to choose any binary options trade type to fit his trade profile. For instance, the sudden announcement by the CEO of JP Morgan about the trading losses recently incurred on its positions is the kind of news release that can lead to a move so hard that it could breach the price barriers of the high-yield option types. The Securities and Exchange Commission announced that it had canceled all equity trading on all markets. It is ultimately up to the trader to determine what kind of trade will suit the news release he wants to trade.
The trader must have access to historical data to be able to use factors like earnings reports for stock binary options trading.
Another limitation to the use of earnings in trading stock binary options is that they are seasonal and can only be used during the quarterly earnings season. These companies are not supervised, connected or affiliated with any of the regulatory agencies such as the Commodity Futures Trading Commission (CFTC), National Futures Association (NFA), Securities and Exchange Commission (SEC) or the Financial Industry Regulatory Authority (FINRA). We warn US citizens of the dangers of trading with such entities and strongly advise that they take legal advice on this in the US.
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