S&P 500 Binary Options
The S&P 500 has been climbing for a year and is ready for a retreat. This may be bad news for long term investors but S&P 500 binary options traders may find profits in the months ahead. Learn to trade binary options and you gain if you correctly anticipate the market. Lose no more than the price of the option if your analysis turns out to be incorrect. Binary options trading is somewhat simpler than standard options trading but it can be a lot more profitable too. If your skills include accurate reading of the overall market you probably are pretty successful in anticipating how the S&P 500 will perform. Consider S&P 500 binary options as the market threatens to become more volatile and fall during the coming year. Let us look at the S&P 500, options trading in general and S&P 500 binary options trading specifically.
The S&P 500
The S&P 500 is the Standard & Poor’s 500. It is a stock market index based on the market capitalizations of 500 large companies US companies listed on the New York Stock Exchange and the NASDAQ stock exchange. The S&P 500 index gives specific weighting to the various stocks according to S&P Dow Jones indices. Because of its broad nature the S&P 500 is considered a bellwether of the United States economy. If the US economy is heading down this year the S&P 500 will go into a slide as well. There are several exchange traded funds, ETFs that are designed to follow the weighting and value of a basket of S&P 500 stocks.
Stock and ETF Options Trading
Standard stock option trading is different than binary option trading. Traders develop strategies involving calls and puts in stocks with the same expiration dates and strike prices. Buying options limits risk to the prices of premium paid. Selling options can entail substantial risk. The amount of profit in buying calls or puts and the amount of loss in selling calls or puts can be substantial. In trading binary options the amount at risk and the amount to be gained are set at the time that one enters the contract. In a binary options contract one gains all of nothing.
Trading S&P 500 Binary Options
Binary options are complex. The difference between making a profit and walking away with a hard learned lesson can be as little as one penny in the value of the equity on a given day at a given time. Traders who learn to trade binary options must know how to do both fundamental and technical analysis of the underlying equity on which the options contract is based. An advantage to trading binary options is that it is possible to enter the market ever so briefly when the factors are favorable and gain a substantial return. That sort of profit comes from correctly anticipating the price of the underlying equity at contract expiration. Many otherwise profitable options strategies do not apply to S&P 500 binary options trading.