Stock trading in binary options

Binary options and stocks are one of the best alternatives of trading of familiar currency pairs. The uniqueness of this tool lies in pricing and the opportunity to earn on a sustainable growing trend without registration on the stock exchange through a broker. It is the high exchange entry threshold, the complexity of the transaction and the high commission are the main obstacle for investors. All these issues are excluded in binary stock options. But there are features that you should be aware not to lose money. About these features and how to build a trading strategy, read on.

What are the stocks in binary options

In the usual understanding the stock trading is performed in the following way:

  • the issuing company allocates the shares on the stock exchange, in electronic or documentary form, where any trader can buy them. We will not go deep into the process of primary, secondary placement and underrating;
  • he trader arrives in the broker’s office, concludes a contract with him to access the stock exchange, receives instructions and trading platform. Some brokers offer remote conclusion of the contract, for example — Finam;
  • at the time of purchase of securities through a broker the trader automatically acquires the right to shares of the company, which immediately is reflected in the electronic register of shareholders.

Binary options brokers have simplified the entire procedure in just a few clicks. Any registration with a broker — all trading conditions are present on the website of the brokerage company. No fees — the transaction happens in just a few clicks, no big starting capital — shares can be purchased, with a minimum deposit of several USD (depending on the requirements of the broker). The only caveat: trade is performed not by stocks but by CFD options — contracts for difference, the ownership of the paper does not occur. As with currency pairs you do not become the owner of yen.

The benefits of trading of binary options for stocks:

  • number of shares on the stock exchange – thousands, currency pairs — several tens;
  • the movement of stock prices depends more on fundamental factors than on technical analysis;
  • stocks of companies are less volatile in comparison with currency pairs.

Trade of binary options on stocks from the point of view of market analysis has no differences from working with stock exchanges.

Tools for stocks trading in binary options

Since fundamental analysis plays crucial role, the success of a trader is to expedite the search and analysis of information about a particular company, as well as control over world events. The following are the examples of tools that should be always at hand:

  • the economic calendar. Contains the date and time of the most important news, has a convenient filter by country and the event (statistics, reports, etc.);
  • leading news sites preferably of the country in which the company resides. The sites publish both news of companies and news of the economy (of the world), which immediately reflected on the stock;
  • shares screeners. Are services that display general information about the stock market of countries that contain general data about the financial condition of the company, reflect investor sentiment. Read more about scenery here and here;
  • graphs of stock quotes. They are both in the platform and in the Internet. It is desirable to compare them among themselves, to see the correctness of broker quotations.

The decision should be based on the correct interpretation of the news. Any news need to be checked first, to assess its authenticity and only then open a position in the options. Speculators love to trade on false information, making the so-called “different stuffing”, artificially inflating the market of binary options and earning on its collapse.

stock trading options

What has the greatest impact on quotations of securities:

  1. External factors:
  • news of central banks and politicians in relation to economic policy. Trading, export-import relations, financial support of domestic economy and certain industries. Even small comments can affect the quotes;
  • solutions in the field of monetary and credit policy: changes in interest rates, the yield of macroeconomic statistics data on consumer demand;
  • global events: elections, referendums, political and military conflicts, sports events, summits, talks, etc.;
  • mergers, acquisitions, purchase of technologies or start-UPS.
  1. Internal factors:
  • financial results (quarterly and annual reporting);
  • investments in scientific and technological development, successful (unsuccessful) market launch of new product;
  • internal corporate conflicts among the senior managers or management;
  • litigation, claims, etc.;
  • results of audits.

And this is not a complete list of what may impact on companies. Technical analysis with this tool in binary options works weaker than fundamental.

Important: the publication of positive report on the financial activities does not guarantee growth in the share price! If investors assume that quarterly profit will be 10%, but in fact the growth was only 5%, with a high probability the company’s stock on the contrary can give a drawdown. Before trading, together with analytical data study and be sure to check the forecast and market sentiment!

The essence of successful strategy in binary options is to catch the moment of rise or fall of securities and trading. In the case of successful prediction, the probability of success is almost 100%, but I would not recommend to work with short term binary options in a quiet market, not supported by fundamental news.

Strategy of stock trading with binary options can be divided into the following types:

  • purchase of different shares at the time the quarterly reports. A successful strategy, if forecast and information about the company are used correctly. The advantage of this strategy of trade is diversification. No matter, which sector you will prefer to trade securities of any companies in the Russian and foreign markets;
  • investments in “blue chip” company, the leader in a particular industry. Check the list of “chips” on the websites of the exchanges;
  • investments in index — balanced portfolio of securities of industry or leading companies.

We will take a closer look at these strategies in binary options and their advantages.

The fundamental strategies in binary options

  1. The purchase of the shares at the time of the release of financial statements

On the 1st February 2017 annual reports from Apple was published, which has proved successful: revenue increased by more than 3% compared to the previous year, and the forecast was 77.4 billion, a fact — 78,35 billion USD. 1 day the share price increased from 121,35 to 127,89 USD for 1 PCs Nice bonus. In the platform on a smaller graph, growth will be more noticeable.

Apple stocks

Tip: do not pursue short-term profit. Set the expiration for a few days, but with the goal of generating profit open several different binary options. Follow the rule of risk management: the sum of all open positions should be no more than 20% of the deposit, use bonus from options broker, try to trade with different expiration.

  1. “Blue chips”

This strategy of options works only after the analysis of the industry. Oil refining industry is now in serious condition. Gazprom shares, recouping the growth of the global indexes after the elections in France, again went down. And resistance level not yet reached, it is possible to trade down. Shares in volatile trending sideways for the last 3 months, so you have to be careful with them.

Important: options strategy used to purchase the securities at the time of payment of dividends and bonuses carries big risks. According to statistics, before the payment of dividends, the asset grows, but almost immediately after payment of the share price falls.

A vivid example of the impact on the quotations of “Blue chips”:

Yandex stocks

On the morning of 16th of May it became known about blocking of Yandex in Ukraine, to which the quotations immediately reacted to the collapse. The uncertainty lasted exactly an hour until they had established a clear position of Yandex and the Ukrainian government. After evaluating the possible consequences and understanding that the ban can be easily bypassed, the quotations are back to the previous level. Quick buying and selling of shares (at the time of the news release are more volatile — set speculative expiration 10-30 minutes) could bring good profit in options.

  1. Index strategy

Evaluation of the advantages of investing in a particular index is evaluated in accordance with the macroeconomic situation in the country. Example:

  • oil due to misunderstandings between the participants of OPEC is cheaper again, which affects the revenue. The MICEX index, has risen in the past year, has reached the resistance level and is now after the sharp drop is in flat with minimal volatility. This is clearly seen on monthly chart:

MICEX index

The three-month graph clearly shows the attenuation of the flat. This means that just one good push to the MICEX went up or down. While not investing, but take the option with that index in the note;

  • the NASDAQ100 index on a yearly chart shows stable and steady growth. Politics of Trump and the rate hike in the USA confirms the economic recovery, and therefore growth in the short term will continue. Recommended expiration from 48 hours and above. Note the surge in the index, after the French elections (round 1 — 23 April) and 4.5% up in 3 weeks:

Nasdaq100 index

Despite the fact that the fundamental event index already played, the trade is still possible. And wait for the next news.

Summary. Stock trading companies and binary options is the opportunity to capitalize on fundamental events. If the strategy with the currency pairs uses indicators more, then the shares subject to the news. Option strategies with shares can be called moderate or conservative. Given the spreads and the growth rate of quotations to buy stock options less than a few hours or days makes no sense. Got questions — we are waiting for them in the comments after the article!

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