Where are Binary Options Used?


Binary Options have spiced up the markets in so many ways, making them exotic options that are generally traded over the counter markets. Initially we only had it available to financial institutions, banks, corporate houses, hedge fund managers and multi-national companies. We have seen a shift largely due to the emergence of online trading platform, and now small investors can also participate in this awesome trading opportunity. We find binary option being used largely for a number of assets like forex indexes, commodities, events, shares or rates.

Binary Options and the Markets

We find binary options being traded in a wide array of markets and this invariably have provided traders a leeway to diversify their portfolio. We have the call and put options of the binary options being used in the platinum market, where they find usage in the anticipation of metal prices of a certain quality over a given period of tie. Manufacturers, dealers and speculators trade Platinum. The prices are decide amongst those trading the metal and not limited to a centralized exchange. We get the involvement of third parties sometimes to look over the deal and calculate the prices.

Certain events such as weather conditions, e.g. temperature, hurricanes, rainfall, etc employs the use of binary options to hedge. Weather conditions are a vital part of many industries. Transportation and agricultural companies would be in so much pain if there are severe weather conditions. Binary options is used to hedge weather events due to the unpredictable nature of weather and also the absence of a way to measure its intensity and damage extent. Having this in mind, the options writer who happens to be the one responsible for selling options undertakes a risk which is related to the occurrence or non-occurrence of the event and the magnitude that is not known and cannot be forecasted. The investors would drive the goodwill of a neutral third party to determine whether the particular event occurred or not. Usually the weather bureau in the United States is an agency that is used for that purpose.

Areas Where Binary Options Can Be Used

I should point out here that Binary Options can also be employed to trade indexes, some of which are the Producer Price Index (PPI) or the Consumer Price Index (CPI), they are all fundamental data coming out of the United States. The figures that are used to trade these indexes are essentially based on independent sampling and are revised when the input values are clarified following their release.

Consequently, binary options can be employed to trade the currency market. Due to the high volatility of the currency market, we have popular currencies such as the US dollar, Great Britain Pound, Japanese yen, Euro and several others. The effect of sudden economic activities on the currency market is high and cannot be over emphasized.

Conclusion

Asides the places that I’ve mentioned above, binary options can be used to trade stocks of very popular and large companies such as Microsoft, Google, Yahoo, etc. I should stress out here due to the low risk binary options carry as compared to traditional trading instruments, they have become extremely popular among investors as a fast money spinning tool.

Just like any business in the world, a bit of research is necessary before jumping into any of the above mentioned products. This may be the easiest type of option available but to make big bucks out of it you should put the work in. One thing is sure, ‘nothing is guaranteed and you won’t be surprised on the trading floor’.

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