Apr 27

Three Ways How You Can Trade Stocks Using Binary Options

Luis Aureliano

There are many different ways you can trade stocks to generate extra income from the comfort of your own home. In this post I would like to share with you three ways how you can trade stocks using binary options.

What are binary options? 

Binary options are an innovative financial derivative that allows you to bet on the price of an underlying asset, such as a stock or a stock index, to either go up or down within a pre-defined time period. Binary option markets are always quoted with a two-way price, such as 49.50/50.50. If you want to go ‘long’

and buy the security, you buy it at thStock1e offer price, which would be 50.50. Should the security close up within the pre-defined time horizon (say 5mins) your profit would be 49.50 times your investment per point (say USD 5). So, if we buy USD 5 per point at 50.50 and the security closes higher after 5 mins, we would generate a profit of USD 5 * (100-50.50) = USD 247.50. Adversely, if the security would end up lower after 5 mins, then you would make a loss of USD 5 * (0-50.50) = USD 252.50. The value of a binary option at expiry is always either 0 or 100. Therefore, your potential loss is always limited, which helps you with your risk management.

To trade binary options you need to sign up to an online broker, such as www.optionsclick.com, that offers binary options trading for a broad range of asset classes with low transaction costs. If your current broker does not offer binary options trading, it is best to read reviews about different binary options brokers online, such as Finpari – realbinary.reviews, to find the one that is right for you and your specific trading requirements.

How can you successfully trade stocks using binary options?

For this post I have collated three binary options trading strategies you can apply to generate profit in the stock market.

stock2Firstly, you can trade company news using binary options. The key to successfully trade using binary options is to identify mini-trends and capitalize on them. Therefore, if there are important company announcements or earnings releases you can capitalize on the stock price movement just after the announcement has been made, as that is when the market tends to trend clearly in one direction for a short period of time. For example, if Goldman Sachs announces worse than expected results, its stock price will drop immediately after the announcement. In this instance, you could sell a binary option on GS stock and will very likely make money on the transaction.

Secondly, you can trade economic data announcements by capitalizing on mini trends, just as you would when trading company specific news. If you trade the S&P500 Index using binary options you can go long after better than expected US economic data has been released or go short immediately after worse than expected US data has been announced, as macro economic data is one of the main drivers of the stock market. Examples of US data to look out for would be GDP figures and unemployment rates. These tend to have the most affect on the price level of the S&P500 Index.

Thirdly, use can trade announcements by central bankers as part of your binary options trading strategy. Central banks have been playing an increasingly important role in recent years, as their interventions in the market through quantitative easing and ultra-dovish monetary policy measures have become a key driver of global stock markets. If a central banker of a major economy such as the USA, the UK or Europe hints at future rate cuts or hikes, this will cause a large movement in stocks prices. This is another way you can capitalize on trends using binary options.

Apr 24

U.S. Markets Move Higher Amid Mixed Earnings(SPY)

By Justin Kuepper | Updated April 22, 2016

 

The U.S. markets moved higher over the past week, as of Thursday’s close, amid mixed first quarter earnings. With just over a tenth of the S&P 500 having reported their numbers, 76% have beat their earnings estimates, and 17% have fallen short. Overall growth is expected to fall about 7.5% as the global economic slowdown and low crude oil prices continue to take a toll on the main sectors of the economy.

International markets were mixed over the past week, as of Thursday’s U.S. close. Japan’s Nikkei 225 rose 5%; Germany’s DAX 30 rose 3.82%; and, Britain’s FTSE 100 rose 0.69%. In Europe, the European Central Bank’s decision to hold interest rates steady could reverse positive trends seen early in the week. In Asia, Japanese stocks continued their impressive rally, and China’s economy continued to slow.

The S&P 500 SPDR (ARCA: SPY) rose 0.6% over the past week, as of Thursday’s close. After briefly touching its R1 resistance at 210.44, the index moved lower toward its key trend line support. Traders should watch for a rebound to retest its R1 resistance or a move lower toward its prior highs at around 207.00. Looking at technical indicators, the RSIremains overbought at 62.66, while the MACD continues to trade sideways over the past week.

SPY Chart

The Dow Jones Industrial Average SPDR (ARCA: DIA) rose 0.63% over the past week, as of Thursday’s close. After briefly touching its R1 resistance at 180.94, the index moved lower toward its trend line support. Traders should watch for a rebound to retest its R1 resistance or a move lower toward its trend line support at around 177.50. Looking at technical indicators, the RSI appears lofty at 65.33, while the MACD continues to trade sideways and provide few hints.

DIA Chart

The PowerShares QQQ Trust (NASDAQ: QQQ) fell 0.09% over the past week, as of Thursday’s close. After briefly moving toward its R1 resistance at 111.87, the index moved lower toward its lower trend line at around 110.50. Traders should watch for a breakout towards its R1 resistance or a move lower toward its pivot point at around 107.37. Looking at technical indicators, the RSI appears a bit lofty at 60.78 and the MACD could see a near-term bearish crossover.

QQQ Chart

The iShares Russell 2000 Index ETF (ARCA: IWM) rose 0.5% over the past week, as of Thursday’s close. After briefly touching its R1 resistance at 113.61, the index moved lower towards its lower trend line support. Traders should watch for a retest of its R1 resistance or a move lower to its 200-day moving average and lower trend line support at around 111.58. Looking at technical indicators, the RSI is modestly overbought at 63.77, while the MACD continues to trade sideways.

IWM Chart

The Bottom Line

The major indexes moved higher over the past week, as of Thursday’s close, but RSI readings remain lofty, and MACD suggests uncertainty. Next week, traders will be closely watching a number of key economic indicators including the FOMC statement on April 27 and advanced GDP on April 28. Traders will also be keeping a close eye on bellwether earnings that are likely to continue to drive prices over the near-term.

Charts courtesy of StockCharts.com.

Disclosure: As of the time of writing, the author had no holdings in the securities mentioned.

Read more: U.S. Markets Move Higher Amid Mixed Earnings(SPY) | Investopedia http://www.investopedia.com/stock-analysis/cotd/042216/us-markets-move-higher-amid-mixed-earningsspy-spy-dia-iwm-qqq.aspx#ixzz46kmrSpTK
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Apr 17

ChartAdvisor for April 15, 2016

By Justin Kuepper | April 15, 2016

 

The U.S. markets moved sharply higher over the past week, as of Thursday’s close, driven by the improving economy and dovish signals from the Federal Reserve. While expectations for first quarter earnings were low, many companies surpassed expectations and posted higher than expected revenue and earnings growth. Analysts remain concerned over the S&P 500’s lofty valuation, and there’s minimal clarity as to where the market is fundamentally headed.

International markets were mixed over the past week, as of Thursday’s U.S. close. Japan’sNikkei 225 rose 7.37%; Germany’s DAX 30 rose 4.9%; and, Britain’s FTSE 100 rose 2.59%. In Europe, investors were encouraged by Eurostat’s consumer price index that was unchanged, indicating that deflation remains in check. In Asia, Japanese stocks posted the largest gains in the world after experiencing a severe decline earlier this year due to the strength of the yen and a lack of inflation.

The S&P 500 SPDR (ARCA: SPY) rose 1.77% over the past week, as of Thursday’s close. After trading sideways earlier this month, the index broke out from its upper trend line resistance toward its R1 resistance at 210.44. Traders should watch for a move to R1 resistance at 210.44 or a move lower to retest its trend line support at around 206.00. Looking at technical indicators, the RSI remains overbought at 64.71, while the MACD continues to trade sideways.

SPY Chart

The Dow Jones Industrial Average SPDR (ARCA: DIA) rose 1.98% over the past week, as of Thursday’s close. After moving lower earlier this month, the index rebounded past its trend line resistance at around 177.50. Traders should watch for a move to R1 resistance at 181.08 or a move lower to retest the trend line support. Looking at technical indicators, the RSI appears overbought at 68.62, while the MACD continues to trend lower since late-March.

DIA Chart

The PowerShares QQQ Trust (NASDAQ: QQQ) rose 1.78% over the past week, as of Thursday’s close. After trending lower over the previous month, the index rebounded sharply past its reaction highs. Traders should watch for a move toward its upper trendline and R1 resistance at 111.87 or a move lower toward its lower trend lien at around 109.00. Looking at technical indicators, the RSI appears overbought at 64.32 and the MACD remains in a sideways trend.

QQQ Chart

The iShares Russell 2000 Index ETF (ARCA: IWM) rose 2.95% over the past week, as of Thursday’s close. After trending lower over the past month, the index rebounded past its 200-day moving average at 111.82. Traders should watch for a move to its R1 resistance at 113.61 or a move lower to its trend line support at around 110.00. Looking at technical indicators, the RSI appears overbought at 63.85 while the MACD remains mostly in a sideway pattern.

IWM Chart

The Bottom Line

The major indexes moved higher over the past week, as of Thursday’s close, although RSI readings indicate overbought conditions. Next week, traders will be closely watching some key economic events, including crude oil inventories on April 20, the Philly manufacturing index on April 21, and employment claims on the same day. Of course, all eyes will also be on the upcoming OPEC meeting.

Disclosure: Charts courtesy of StockCharts.com.

As of the time of writing, the author had no holdings in the securities mentioned.