Three Ways How You Can Trade Stocks Using Binary Options

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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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How to trade Binary Options

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Many investors that want to be involved with the foreign currency market grapple with the idea of trading either forex or binary options. Each has its own advantages, but overall, trading currencies, as well as other assets, is easier and potentially more profitable with binary options.

Learning how to trade binary options is very easy. All you need to do is pick an asset, a price direction and investment amount. You will always know your potential payout immediately and never have to worry about the potential profit amount. If you finish “In the Money,” you’ll receive your payout with no hassles. When you trade binary options you don’t need to see huge market movements, like is required in forex trading. If the market price moves even the slightest amount, you can still profit from a binary options trade.

Unlike forex, where you can only trade currency pairs, binary options trading also gives you the chance to trade stocks such as Google and Facebook, commodities like gold and oil, as well as indices from around the globe.

Furthermore, with binary options you have many more choices for short term trading, allowing you to make trades in as little as 30 seconds. Some binary options brokers also offer an “early closure” feature so that you can close early when you are in the profit zone for a percentage.

Besides the “early closure” feature that is offered by some, the prices and expiry times are fixed when trading binary options. This is very different than with forex, which allows you to close when you want and for how much you want. This can be advantageous for some investors, but many enjoy the consistency that is offered by trading binary options.

To help you get started, many binary options websites offer bonuses and competitions, as well as education centers to learn the basics and improve your trading strategy. Once you have the basics down you can move on to incorporating technical and fundamental analysis into your strategy and solidifying your trading techniques.

While neither binary options nor forex can guarantee profit, when trading binary options you will always know your potential payout and the risk involved. It’s simple to get started and to learn the basics of binary options trading, and there is no need to learn confusing terminology that may intimidate some new traders. If you are not sure which to trade, try out a few websites by opening a demo account and see for yourself which you prefer.

When you trade currency pairs with binary options you never have to worry about lags or spreads, and the confusing terminology is taken out. All you have to do is pick the asset you want to invest in and wait for the expiry time. Trading with binary options allows you to take advantage of the currency exchange markets without having to become in expert in forex.

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