Of course, not everyone agrees that China will be growing so fast. A couple of major problems loom: China’s GDP has indeed been growing rapidly in the last 30 years, but that could be because it has a while until it reaches a high rank. Chinese GDP is still below the 100th rank in the global economy. Another factor making it difficult for China to climb to the top is the state of the current global economy, the decrease in demand for exports and the rise of unemployment.
Some experts even feel that China’s GDP will fall in the next few years. Hedging might be a great binary options and forex strategy for traders of forex and binary options for those who are cynical about the Chinese takeover of the world.
What this means for traders:
Traders might want to pay attention to the Asian currencies, in particular the yuan, the Chinese currency which the Chinese government decided earlier to peg to the dollar (see our previous post). This in turn makes Chinese exports more expensive, but imports cheaper. Be on the lookout for trades connected to rises in production expense and major companies such as Wallmart and Target, who have overseas factories. Other companies which have been cheaper alternatives to American products, such as Toyota and Honda, may also present good binary options opportunities.
What this means for trade operators:
Chinese stocks and markets are a new opportunity for traders. The Asian market will also be influenced by its #2 neighbor. Read more about online trading in the binary options market.
This strategy is called gaming the news ticker.
You want to make the most out of your trades.
Is there a way to place trades knowing in advance information that makes the likelihood of you profiting from the trade higher than those without this information?
No, we’re not talking about inside trading. We’re talking about responsible research on market indicators. You should research your favorite stocks and securities to find out when they report their quarterly earnings.
Place trades right after an official earnings release statement. Do your research on whether or not an instrument has usually fallen or risen after an earnings report.
For how long does it rise or fall? How quickly? By how much?
Place your trade accordingly. This is information a responsible trader has that many don’t bother to research. Research them and you will be ahead of the game.
Posted by Tamar | Posted in What are binary options? | Posted on 24-02-2010
Below are a list of a few myths and facts you may have heard about binary options:
- It’s just based on luck.- MYTH Not really. Although last-minute changes in the price of the instrument are inevitable, there are strategies that you can learn to manage risk and increase your chances of gaining money. Our blog includes links and resources for learning more about binary options and some of the strategies shown to help traders minimize risk.
- I have to be an expert on finance and stocks in order to invest in binary options. - MYTH If you have the right personality, binary options trading can be a great way to increase your earnings. You need to be determined, patient, and willing to invest time and effort to learn about binary trading. But compared to the conventional market, you don’t have to be an expert. In fact, binary options were in part designed as a simpler investment alternative to traditional investment. Of course, if you are a financial expert you are ahead of the game. Our Markets Pulse blog and platform offers you lots of information to start from, and we will in time recommend more information for advanced binary options traders.
- Great. So anyone can do it.- FACT Anyone CAN do it. Binary options trading, however, is not for those of the gambling mentality, who want to arbitrarily select calls and puts all day long. These people will lose a lot of money. See #2 for more information on the amount of effort needed to become a binary options trader.
- It is boring to predict whether a stock rises or falls within an hour. - MYTH Nothing could be further from the truth! Prices of binaries can change at a moment’s notice, due to various market changes. There are different types of binary options, which you can read about on our blog: http://blog.marketspulse.com/?p=14 In addition, our platform will introduce exotic options in the near future, which offers more advanced alternatives to the traditional call and put system.
- I need a lot of money in order to start.- MYTH You can start trading with as little as $100.
- The commissions for buying binary options are high. – MYTH Markets Pulse does not charge commission fees. Most of the online brokers don’t charge commission fees. Find a broker that doesn’t charge these fees and gives a protection rate.
- It’s an easy way to make money.- FACT See #2 for more information on the personality needed to succeed in binary options. Again, binary options trading are not for the faint of heart. But with some research and knowledge of the industry, you can earn money.
- Binary options are short-term options, expiring within the day or within an hour.-FACT Yes, binary options are short-term, and are used for intraday trading and even hour-long trades.
- I have to first lose a lot of money in order to “get the hang of it.” – MYTH Markets Pulse offers you to join and start trading with practice money. It is strongly advisable to do this before placing actual bets. You will minimize risk.
- Binary options are a relatively new form of trading and the simplest form out there. – FACT Indeed. Binary options have only been out for the past two or three years. But they have taken off and are growing more and more popular by the day. They are simpler than the traditional methods of investing.
This strategy benefits you mostly when you have two options with a range of expiry, where both options could be in the-money. Then you are able to minimize your risk but also maximize your gain.
This option is almost most popular in forex binary options, in which the value of the currency can change very quickly in either direction. In this scenario, hedging could be a viable option for reducing risk to the trader.
Take the following scenario of a forex binary option based on the price of the Euro. The Euro has been rising and is predicted to continue to rise at a determined breakout point. At this point you would place a call, expecting the Euro to rise. But what if the price changes quickly and falls? You can place a put option at another point, helping you to minimize risk in the event that the price indeed falls.
In the above scenario, you have placed a call for $500 at the option price of 5.1. You have also placed a put for $500 at the option price of 5.3.
The following outcomes could occur:
- The Euro price could expire at 5.1 exactly, making your call option at-the-money. You would receive $500 in return of your initial investment. In this case your put option would be in-the-money, and you would receive $850 on your initial investment. Total investment= $1000. Profit= $350. This trade would end up being a net gain. (-500 + 500 + -500 + 850)
- The Euro price could expire between 5.1 and 5.3, making both your put option and your call option in-the-money. You would receive $850 for both trades. Total investment= $1000. Profit= $700. (-500 + 850 + -500 + 850) This trade would end up being a net gain.
- The Euro price could expire below 5.1, making your call option out-of-the-money. You would receive $75 in return of your initial investment. In this case your put option would be in-the-money, and you would receive $850 on your initial investment. Total investment= $1000. Profit= – $75. (-500 + 75 + -500 + 850) This trade would end up being a net loss, but you still lose much less than you stand to gain in other scenarios.
- The Euro price could expire above 5.3, making your call option at-the-money, and you would receive $850 in return of your initial investment. In this case your put option would be out-of-the-money, and you would receive $75 in return of your initial investment. Total investment- $1000. Profit= -$75. (-500 + 850 + -500 + 75) This trade would end up being a net loss, but you still lose much less than you stand to gain in other scenarios.
- The Euro price could expire at 5.3 exactly, making your put option at-the-money. You would receive $500 in return of your initial investment. In this case your put option would be in-the-money, and you would receive $850 on your initial investment. Total investment= $1000. Profit= $350. (-500 + 850 + -500 + 500) This trade would end up being a net gain.
In each scenario, you stand a chance of winning a greater profit by hedging, or placing two bets in opposite directions, than the all-or-nothing chances of one binary bet. In the instances in which you stand you lose money, you lose far less than the possibility you have to gain a greater profit than loss in other circumstances.
