You can trade binary options using commodities as their underlying assets. This means that you have the exciting opportunity to speculate on assets such as oil, gold, silver and copper, etc. When you trade commodities directly, you have quite a daunting task in that you have to evaluate and gain a feel for the magnitude or size of their price movements. In contrast, you will discover that trading commodities using binary options is a simple task because you can focus on selecting just their future price direction without concerning yourself about their size.
However, even despite this significant simplification you must still adopt caution because commodity trading usually involves much higher levels of volatility than other forms of investment speculation, such as Forex and Stocks. For example, the fluctuations of gold prices can be as much as twenty times larger than the equivalent ones of the EURUSD currency pair within the same time-period. This feature presents you with a great potential for large profits if you know what you are doing when trading commodities. However, there is also is a serious downside because your risk exposures will also be much higher when trading gold.
Consequently, the key to success when trading commodities using binary options still depends on careful analysis and research. For instance, if you could gain assurance that the price of gold will rise constantly over the next few months you could then action a ‘call’ binary option with confidence using gold as the underlying asset.
Similarly, you may decide that a new surge in the global production of industrial and electrical products was imminent that would involve a large increase in the usage of electrical copper wiring. Under such conditions, you should consider investing in copper by activating a ‘call’ binary option with this metal as the underlying asset.
You should now be able to see the importance of keeping yourself up-to-date with all the current trading trends of commodities if you want to be successful at trading binary options using them as underlying assets. Basically, you must develop an appreciation about when to expert the prices of commodities to shift either downwards or upwards. As such, you need more than just gut feelings and hunches to succeed at trading commodities using binary options. You will have to undertake extensive research in the global demands and trends of all commodities that interest you especially if they are precious metals, petrol or natural gas, etc. If this is your intended objective, then you can obtain quality information about all commodities by visiting appropriate news agencies specializing in this subject which you can locate on the internet.
Fundamentally, the actions required to trade binary options based on commodities are exactly the same as all other asset type. The only major difference is that you will need to undertake more extensive research so that you can both take advantage of and defend yourself against the higher levels of volatility produced by this type of asset class.
As already stated, you must always remember that when you trade commodities using binary options you may have to content with large price swings generated by a number of economic and fundamental factors. For example, as gold is considered to be a very safe-haven by most traders, its value can appreciate substantially even when other financial markets are crashing.
Although you must always respect the increased risks involved, you must acknowledge the significant opportunities you can gain to register worthwhile and consistent by using binary options to trade commodities. This is because you just need to predict the direction that the price of the asset will move and not its size or magnitude. Subsequently, if you can gain confidence that gold, for example, will increase in value for days or weeks then you could proceed to buy it by opening a consecutive number of ‘call’ binary options. By doing so, you could generate for yourself a series of profitable payouts.
You would be able to achieve this objective because most brokers allow you to open binary options with expiration times of just a few minutes or hours. Consequently, you should seek to trade those commodities which constantly produce substantial price movements in order to increase your chances of forecasting the correct directions.
Many traders consider this to be a very powerful and effective binary options strategy. Basically the idea is to exploit the variance in the movements of commodities on the share values of companies that trade them.
For example, significant movements in the price of aviation fuel can seriously influence the share values of airline companies. Consequently, if you believe that a spike in the price of aviation fuel is imminent then you could consider activating a ‘call’ binary option with this commodity as its underlying option. In addition, you could hedge this bet by opening a ‘put’ binary option based on the shares of an appropriate airline because you are anticipating them falling in value as a consequence of this development.