The binary options market is unique in the sense that traders have the opportunity of trading every single asset class that there is in the financial markets. The binary options market serves as a melting point for all these asset classes. So if you are a trader who has an interest, or is proficient in the trading of these assets in their traditional markets, the binary options market provides an avenue to further generate cash flow from your preferred market.
What asset classes are traded in the binary options market? There’s basically 4 major classes of assets available such as:
- Currencies (forex)
We all know what stocks are. Stocks are listed on the various exchanges all over the world, but for the purpose of binary options, the most important exchanges where stocks are listed and which are made available for trading are those listed on exchanges in the US, Europe, Asia and the Middle East.
There is some peculiarity in the distribution of stocks from these zones on the binary options platforms. An examination of several broker platforms will show clearly that brokers tend to list stocks from exchanges that are located within the same continent as the broker’s offices. So a Western European-based broker will more commonly list stocks that are listed on exchanges in London, France, Switzerland, Germany, etc. So we get to see companies like France Telecom, Deutsche Telekom, BNP Paribas, Lloyds, Barclays, HSBC, etc being listed. By the time we start heading east to brokers in Russia such as Dragon Options, then we start seeing companies like Lukoil and Gazprom becoming popular listings. Take a broker from the US and we see US-based companies also listed.
There are however stocks which are always listed no matter where the broker is listed because of the global nature of the affected companies’ operations. This is where companies like Apple, Microsoft, Google, Cisco, Coca Cola, McDonald’s and global banks like JP Morgan and Goldman Sachs.
Trading stocks on binary options is tricky, and it usually works best to trade stocks that are familiar to the trader. For instance, a trader in France may be best suited trading a stock like TOTAL, Societe Generale or France Telecom as a binary options asset, than trading a Lukoil or a Starbucks. This is because a French trader will better understand how French companies operating in a largely French environment will work, and will be more informed about how to use the relevant market information to perform trading activities.
Currencies are more globalized in nature than stocks. This is because apart from a few exotics, the most traded currencies (major and minor) are going to be traded by traders all over the world. Currencies present many trading opportunities because of the fast-paced nature of the market. Therefore traders who are familiar with the currency market will not have much problems adapting to the binary options market. Generally speaking, currency pairs that appear on most broker platforms are EUR/USD, GBP/USD, USD/JPY, EUR/JPY, GBP/JPY, EUR/GBP, USD/CHF, USD/ZAR, EUR/TRY, USD/TRY, USD/NOK, USD/SEK, EUR/NOK, EUR/SEK, AUD/USD, NZD/USD, AUD/JPY, NZD/JPY, EUR/CAD, EUR/AUD.
Once again, there is some slight leaning to the popularly traded currencies in a region, so we see the Asian brokers serving up a lot of pairings involving the Australian Dollar, New Zealand Dollar and Japanese Yen, while European brokers will serve up the crown currencies in Norway and Sweden, as well as the Euro, British Pound, etc. The USD being a global reserve currency will always come up with other currencies.
Stock indices are measures of the exchanges that stocks are traded on. There are many indices which are national in nature, traded in the binary options market. The charts for some stock indices are seen on some forex broker platforms like that of FXCM. Indices listed for trading are usually listed with a preference for regional proximity to the brokerages. So brokers in Asia will feature Asian and Middle Eastern indices like Tel Aviv 25 (Israel), Tadwul (Saudi Arabia), DSM (Oman), Hang Seng (Hong Kong), ASX 200 (Australia), SSE180 (Shanghai) and Nikkei 225 (Japan) very prominently. European brokers will list virtually all the European exchanges.
Many foreign companies are listed on the US exchanges, and this is why virtually every binary options platform will list the Dow, S&P500 and NASDAQ, the popular US exchanges.
Due to their importance in the global economy, commodities such as gold, crude oil and silver are virtually permanent listings on broker platforms. A few other important agricultural commodities and spot metals like cotton, corn, coffee, sugar, platinum, natural gas and cocoa are sparsely listed.
Whatever asset you choose to trade, make sure it is one you understand and one whose fundamentals you are familiar with.