Stocks Binary OptionsStocks are what financial markets are built around. A stock represents a share in the equity of the underlying asset. For instance, investors that own Apple stock actually own a piece of the company. While each stock may only represent an incredibly minute piece of ownership in a company, the investor who holds the share stands to gain as the company grows or lose if the company value falls.

Where Are Stocks Traded

From a general investor standpoint, stocks are traded online through a broker or directly through a broker either over the phone or face to face. However, the actual exchange of stocks goes much further than that. Orders for stocks are taken and fulfilled by what is known as a stock exchange. For example, here in Canada, the prominent stock exchange is the Toronto Stock Exchange. So, no matter what broker you use, whether online or off, if you’re trading large company stocks in Canada, chances are that your orders will go through the Toronto Stock Exchange.

What Happens When A Company Decides To Sell Shares?

When a new company decides to sell shares to the public, the offering is called an IPO or initial public offering. Initial public offerings tend to be met with quite a bit of volatility. Therefore, while most experts will say not to invest long term in an IPO, options traders generally see these offerings as great opportunities for profits.

Where Stocks Come Into The Binary Options Trading Arena

Stocks are one of the four main groups of assets that binary options traders predict price movements within. The four groups of assets include stocks, indices, currencies, and commodities. When trading binary options based on stocks, the trader would pick a stock or two that they feel they know enough about to predict price movements.

Once the trader chooses a stock, they would predict whether the value of the stock is going to rise or fall, if they believe the value of the stock will rise over a predetermined period of time, the trader would purchase a call option. Adversely, if the trader believes that the value of the stock is going to fall over time he or she would purchase a put option. If their predictions are proven to be correct once the option expires, they stand to earn up to 80% return on their investments.

How To Trade Binary Options With Stocks As The Asset

The process is simple, all you need to do is follow these steps…

  • Choose A Stock – It’s best to choose a stock that you have followed. The more you know about the stock, the better your chances are of making accurate predictions.
  • Choose An Expiry Period – This is the length of time you have for your prediction to come to fruition. Once the option expires, if your prediction is correct, it will be in the money, and you will earn a return. If the prediction is incorrect upon the expiration of the option, the option is rendered valueless.
  • Choose A Strike Price – The closer the strike price is to the current stock value, the more chance of your prediction being correct. However, the further the strike price, the higher the gains!
  • Purchase Your Option – If you believe the stock will rise in value, purchase a call option. If you believe the stock will fall in value, purchase a put option!

It’s that simple! So, what are you waiting for, get started now!

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