What is an underlying asset?
An underlying asset of a binary options can be stock, indices, commodities or currencies, i.e. this is an asset due to which the binary option makes money. Every broker has a long list of the underlying assets. For instance, you can buy the following options on the underlying assets from AnyOption broker:
The underlying asset is stock
This is the most popular asset as using binary options you can make money from the stocks of such well-known companies as Coca-Cola, Apple, Google, Bank of America etc. Stocks entitle its holder to get the dividends or a part of the company’s assets. Investing in a binary option, you don’t have this right, but you get higher profit as you can make up to 70% return just in half an hour when stock returns only 30% per annum! Due to mass media and news, there is a lot of actual information about companies and stock market.
The underlying asset is indices
Indices are a kind of a share portfolio of the largest companies in the country. Every stock exchange has its indices, prices of which are defined by the average value of all the companies’ stocks constituting the index. Prices of the most significant indices as a rule are influenced by the events both inside and outside the company as some indices include shares of the largest companies of the country the economy of which is based on them.
Therefore, if things go wrong in the country, this impacts on the price of the index.
That is why indices are also popular financial instrument as all the information required is available from mass media.
The underlying asset is commodities
Commodities as well as stocks and indices are sold in the exchange markets. Commodities like oil, gas, non-ferrous metals, gold, silver are also underlying assets. There are more than 10 items in the commodities category. To follow this market, you need to watch the latest news relating to the underlying asset you chose. Dates of upcoming news you can find in the economic calendar on the website.
The most popular commodities in Europe and Canada are gold and oil.
The underlying asset is currency
This is the most popular underlying asset as the foreign exchange market is the most rapid and liquid. Both fundamental and technical analyses are important for the foreign exchange market. These instruments allow predicting future price trends. Despite complexity of the market, it has the biggest money turnover as currency is the most liquid thing in the world.
The choice of an underlying asset is half the battle in binary options trading.
And if you know how to analyze binary options, you can predict price fluctuation accurately and profit from investment in binary options. Check out other pages on the website and find many effective instruments which could help you make money from binary options!