As with most forms of investments and trading, the assets underpin binary options trading and are truly essential for the whole process to work. Without assets there would be nothing to invest in and no prices to monitor, although it is always important to remember that traders never actually gain ownership of their chosen assets. Instead, they are simply backing a fluctuation in price on any given product. This appeals to some traders, most notably those that get involved in options trading in the first place, as they are free to maintain larger portfolios with none of the potential complications of being an actual shareholder.
The majority of brokerages and trading platforms grant access to four specific asset classes:
Stocks are perhaps the most closely associated asset to conventional investing. The majority of brokerages allow their traders to invest in price movements in the stocks of the world’s largest and most desirable companies, including Apple, Google and Exxon Mobil, while some specialise in trading on lesser known but equally potentially profitable brands, which are favoured by traders that prefer higher risk strategies.
Indices are effectively collections of stocks with the overall price being determined by the constituent stocks. The most mainstream are various indices offered under the likes of the Dow Jones, FTSE and NASDAQ names, although most stock markets in the world offer comparable indices of their own. As with stocks, traders can generally expect the majority of the biggest names to be available on their platform of choice, with some offering a more diverse range.
Commodities, rather than being linked to the performance of a company, are actual desirable items such as gold. The process remains largely the same in that where a stocks trader is predicting whether the share price of a company will rise or fall, commodities traders will be banking on the price of a given asset rising or falling. Rather than looking into sales figures, boardroom appointments and other factors that affects stocks and indices, traders in this area will be more inclined to monitor supply and demand, inflation and more specifically economic factors.
Forex may be an investment style all of its own, but it also plays a major part in binary options trading. Some brokerages offer both binary options and Forex trading as standard, which will generally lead to more currency pairs being available to traders. However, even standalone options brokerages generally offer the most common pairs, which generally comprise some combination of GBP, USD, JPY and EUR. When trading Forex, investors are actually buying and selling the currency, hence taking ownership and becoming a ‘shareholder’. However, when using these currencies for options trading, the same rules apply and investors are only backing price movements rather than ever truly owning their chosen asset.
There are many reasons to trade in all manner of different assets, but much of what a trader decides to invest in will come down to what they are most familiar and comfortable with. An investor coming from Forex trading to options trading, for example, is likely to stick with currency pairs. An investor that reads business news daily, on the other hand, is more likely to side with stocks and indices. Either way, the majority of brokerages offer a comprehensive package of assets, allowing traders to both stick with what they know and also experiment in potentially profitable new areas.