One group of assets that can be traded in the binary options market are the stock indices. The stock index is the asset derivative of the stock exchange on which stocks are traded. There are several advantages to trading indices versus trading singular stocks – which I will extensively cover in my article. However, one such advantage is that, whereas individual stocks can carry a great deal of risk if they would swing upwards or rapidly decline, indices are much more varied, and therefore do not carry as much sudden risk.
Binary options trading offers a wide range of asset trading varying from currency pairs, commodities, stocks, indices as well as commodities.
I have taken the initiative to summarize for you a few facts with regards to learning more about Index Binary Options.
|A fundamental analysis is not necessary, as each index is a combination of many different stocks. Another point is that an index option is a short-term trade so you are concerned only with the value of a stock.||Due to Index options being very expensive, one big loss can lead you to an account that is empty.|
|Index options are generally very liquid and make this easier for individual traders to have the ability to move in and out of index options quickly and with a profit potential.||You will need to keep an eye on your Index trades as Index options are heavily traded and are subject to high volatility. If you don’t, you may open your account at the end of the day and learn you have run into a huge loss.|
|More efficient use of research time as if you are trading an index, there is no longer a need to search the markets for a stock to trade alongside||The volatility of index options can swing from a high to a very low in a short amount of time, this is why Index trading needs your attention.|
|As an index characterized by a wide-variation in a group of stocks, which allows your portfolio to have a good variety and diversity.||Due to the fact that index options are extremely overestimated and that time value wears down quickly as the index nears expiration time, selecting the ‘call’ on an option could fall in value even if the index is steadily moving in an upward direction.|
|Index options can also be traded both on the long and the short side for profits in both a bear or a bull market|
Depending on the platform you select to trade with, here are a few of my favorite indices to trade on as they are very news worthy and there is always some news found about these few:
- DAX – The DAX (.GDAXI) is a stock market index that is representative of 30 of the largest and most liquid German companies that are traded on the Frankfurt Exchange
- Hang Seng – The Hang Seng (.HSI) is an Asian index that is based on 41 of the largest companies in terms of market cap that are traded on the Hong Kong Exchange.
- Dow Jones Industrial Average (DJIA) – The DJIA is a price-weighted average of 30 individual stocks from both the New York Stock Exchange (NYSE) and the NASDAQ
- S&P 500 – This Index is a U.S. stock market index that contains stocks of 500 large corporations that are located in the United States
Top Binary Brokers To Trade Indices
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