Binary Options on Futures

Posted by OliverPearson 0

Binary Options on Futures

Presently, one of the basic financial instruments is so-called “futures”.

A future is a contract for a future deal at the price fixed today.   

Therefore, future contracts allow insuring yourself or, as they say in finance, hedging your risks. Depending on the type of the future contracts, you can hedge currency, interest, loan risks etc.

However, the required start-up capital for futures operations is several times less comparing to the amount you need to trade stock.  Today, there are four types of futures, namely

commodity (or raw materials)

currency futures

security futures (bills of exchange, bonds, stock etc.)

 

Needless to say, the financial instrument having such a facility cannot stay unnoticed by the binary options market. As I said above, a binary option allows earning on the price increase or decrease of an underlying security, then why it cannot be an index future contract?

Let us consider how you can make money investing in the binary options the underlying of which is an index future (one of the most common).

Firstly, you need to choose the binary options on the futures of the most traded indices like NASDAQ 100, Standard & Poor’s 500, DAX… The corresponding index futures are referred to as Nasdaq 100 Fut, S&P Future, DAX Future etc.

The next thing you need to do is to select a future price direction, whether the price of the future contract goes up or down. The beauty of the investment in the binary options on futures is that the underlying is highly sensitive. For instance, the NASDAQ Tech Index dropped by 3% yesterday after the bell, and to be sure, this impacted the NASDAQ futures!

The fluctuations on the index market like this is a common thing.

For instance, you can choose to buy a binary option on Nikkei 225 Future. The matter is that Japan is presently going through tough times. The Bank of Japan is aggressively fighting with deflation using untraditional dangerous instruments. Meanwhile, Prime Minister of Japan Shinzo Abe unfolded large-scale economic reforms, the so-called Shinzo Abe’s “threearrows”. These measures aimed to drag the country out of the 20 year stagnation are discussed in the financial world fearing the collapse of the Japan economy which could hit the globe. Therefore, any negative news about Japan can make Nikkei 225 go down by some ticks. And you can make a good profit buying a corresponding binary option!

So, you need to choose the binary options on stock index futures of the developed countries where the economic situation is unstable. Choose the European indices like DAX, FTSE 100 etc.  because Eurozone is approaching deflation, there is a risk that Gazprom can cut off the gas supply hitting Germany, rioting in France etc. The stock markets of these countries regularly drop down following negative news; hence you can earn investing in the binary options on the stock index futures of these countries.

How it works: Binary Options on the Futures

I selected the future on European index DAX:

Binary Options on Futures
 

When you analyze the market, you need to pay attention to both long-term and current trend lines. As the chart shows, the price will going up, and I decided to follow the new trend:

Options on Futures
 

I selected the amount of $175 and clicked CALL (UP) as I anticipated the price would go up.  The time of expiration was 11:30 a.m., and as that moment it was 11:14 a.m., the period of my investment constituted 16 minutes.

During this period the price of futures as I expected increased, and I earned a 77% profit from $170 investment. My net profit constituted $130.9:

Futures

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