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, 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 –, 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.

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