Stock trading happens every day as an untold number of equities are traded around the world. This is probably explained by the fact that they allow people to participate in the highs and lows of the companies they know and love most. Accordingly, the most common stocks offered as underlying assets for binary options are the shares of large, hi-tech companies like Google, and large multinational corporations like McDonald’s, Nike and Barclays.
By definition, a stock is a share of a given company. When the value of the company rises, it translates to the value of its shares rising. The idea behind offering binary options for the stocks of popular companies is that information and news are readily available on them to help traders make informed trades.
In binary options, if a trader places a Put option on a stock like Tesla and the option expires in 2 hours, this means that he or she believes Tesla shares will decrease in value by the end of the next 2 hours. The price only needs to move fractionally higher or lower than the Strike Price for a trade to be profitable.
The stock market is quite volatile. This creates numerous opportunities for profitable trades as the prices of company shares go up and down.
Trading stocks is easy and straightforward. Traders are only concerned with short-term movements in stock prices and do not need to look for trending markets.
Depending on the tool used, stocks are available for trading with investment amounts as low as $25. The potential payouts are also fixed and are known ahead of time.
The ease with which stocks can be traded has a lot to do with widely available free information. Just watch out for important events and jump in to trade at the right time.
Four times a year, publicly traded companies are required to report their performance so investors can gauge the financial health of the company and determine whether it deserves their investment. This creates trading opportunities because price volatility is high when firms announce quarterly earnings.
For example, if a company delivers quarterly results with better-than-expected earnings, stock prices usually jump. Conversely, if the report is disappointing, stocks tumble.
Earlier this year, Switzerland’s central bank abandoned its policy of holding the value of the Swiss Franc down against the Euro and the currency moved by more than 15% in a day. This caused the stock prices of major Swiss companies including watchmaker Swatch and food multinational Nestle to slump.
This is because as the currency of a country rises, it makes the country’s products more expensive for foreign buyers. As a result, the stock market shows price drops across the board.
Product speculation and announcements create publicity and excitement regarding a company’s future earnings and cashflow. This generally has a positive effect on stock prices unless the product receives negative feedback and a low level of enthusiasm.
For example, Apple’s iPod Nano announced in September 2005 caused Apple’s stock price to climb 3.3 percent to close at $69.34. The announcement of Creative’s WebCam Live Motion around the same time did the opposite and stock price of the company dropped.
The most popular stocks available for binary option trading include Apple, Google and Vodafone.
Founded in 1976 by Steve Jobs, Apple Inc. is an American multinational technology company headquartered in Cupertino, California. Trading in Apple stocks runs Monday to Friday, from 13:40 GMT to 20:00 GMT.
Google is an American technology company specialising in Internet-related services and products. It was founded in 1998. Trading in Google shares runs Monday to Friday, from 13:40 GMT to 20:00 GMT.
With over 430 million subscribers, Vodafone is a British multinational telecommunications company with headquarters in London. Trading in Vodafone stocks runs Monday to Friday from 07:30 GMT to 15:30 GMT.
Other popular stocks available for trading include Wal-Mart, Facebook, Coca-Cola and Tata Steel.
To know what’s happening with your favourite companies and subsequently identify trading opportunities, check our Economic Calendar for daily and weekly trading signals.
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