In this article we are going to look a little closer at stock based binary options and what you should think about when you are trading with these options. Stock based binary options are binary options that have stock as the underlying asset. Binary options where the market value of a certain stock decides whether the option matures in the money or not.
The options can be based on any publicly traded stock but they are almost always based on stock in big international companies. They are never based on stocks in small companies with low liquidity or penny stock. The reason for this is that small stock with low liquidity and certain penny stock are too easy to manipulate and it would be too easy for an investor to purchase stock to manipulate the stock value and make sure that a binary option matures in the money. By only basing their option on very large international companies the brokers make it practically impossible to manipulate the stock price on the open market.
Example of a suitable stock includes:
Choosing a broker
Almost all brokers offer at least some options based on stock. The size of the selection and which stocks that are used as underlying assets can however differ greatly between different brokers. You should therefor research different brokers to see which stock based binary options they offer before you chose which broker to start trading at. It is important that you look at the actual selection of options, not just on the list of stocks the broker offer options based on. Some brokers offer very few stock based options despite a large list of stocks they base options on. Other brokers offer a large selection of options despite the fact that they only offer options based on a low number of different stocks.
Find a broker that focuses on stock based binary options and register with them. If you want to trade with binary options based on a certain stock then it is important that you verify that the broker offer a large selection of options based on that particular stock before you register.
Look for a broker that gives you access to a large selection of options you want to trade with and that therefore give you a good chance to earn money. Ignore the size of the bonus and focus on the selection of options and the return you get when an option matures in the money.
There are three main strategies that you can use to successfully trade stock based binary options.
- Use short binary options and technical analysis to make money from short term movements in the stock price. This technique requires you to be a very active trader that spends a lot of time each day analyzing the market and trading options. This is not a good option unless you are able to focus on the trade full time. This technique is not a good fit for some one who has a job and wants to be able to make a little money on the side.
- Trend trading. It is often possible to make a lot of money on stock based binary options if you use super short options to ride a trend and earn a lot of money very quickly. You can often earn a lot before the trend is over. You need to be able to identify suitable trends and act quickly when you find one. This makes this strategy most suitable for full time traders.
- Use long binary options together with fundamental and trend analysis to make money from the long term trends. This is a good choice for traders who can analyze stocks on nights and weekends but that are unable to focus on the trade full time. Your goal is to find and predict market trends during the next few days or weeks and use this knowledge to make money from longer binary options. Stock based binary options are the best option if this describes you. Other types of underlying assets are harder to predict in this way.I recommend that all traders who want to make money on binary options on the side of their regular job focus on stock based options and options with long maturities.
Who should chose stock based binary options
Stock based binary options offer something for every one but I primarily recommend stock based binary options to traders who wants to make extra money on the side but that don’t want to dedicate themselves to the trade full or part time. Stock fundamentals and long term trends make it easier to predict the long term development of stocks than it is to predict future movements of other instruments. This make stock based binary options the perfect choice for traders who have regular day jobs as it doesn’t require you to analyze the market in real time. It is enough to make long term predictions and buy suitable binary options. You can dedicate one night a week for binary options trading and still have a good chance to make money.