The economic picture in the European Community is not clear. The southern tier nations have come near going into default on their sovereign debts. The risk of a breakup of the EU has driven stocks and the Euro up and down for the last couple of years. Now that the EU ministers have agreed to closer economic integration there may be light at the end of the tunnel. However, no one expects quick fix and a renewed recession in Europe could lead to a global economic downturn. Folks who are buying puts on SAP may be looking exclusively at Europe or at the bigger picture. However, a recession will likely hit SAP sales and stock price. The stock has traded between $50 and $68 a share in the last year and is at the bottom of that range and heading lower if the folks buying puts on SAP are correct. To a degree some traders may be simply hedging risk with options . Anyone who bought the stock nearly a decade ago bought at below $20 a share. They may still expect the stock to rise but do not want to get caught in a short term fall in stock price.

Although these may not be a good times for owning stocks these may well be good times for options trading . Buying puts or calls on a stock, provides investment leverage for the options trader. It also allows the trader to hedge investment risk. The buyer of an options contract is under no obligation to buy or sell the stock in question. However, if the price of the equity moves as expected the options trader can do so and profit thereby. The price of an options contract is significantly less than that of the stock in question. In chaotic times such as these traders take advantage of options trading in order to earn profits while limiting risk. Those buying puts on SAP expect the stock price to fall and will profit if it does. However, they have limited their risk in case of a rise in stock price to the price of the options contract.

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Indeed, in order to make a profit trading stocks not only you need to be sure that the price is going to move in a given direction, but also, you must be right about the magnitude of such movement, because if you go long on a stock which is trading at $5 and it goes up to $5.05 you will not even have enough to pay for the commissions if you are trading with $500 account.

One of the problems is that in order to make a profit not only you must be right about where the price is going, but also about how far is it going, and the fact of the matter is that determining the direction of the price within a particular time frame is relatively easy, but assessing accurately how far is it going to go is really the hardest part of the equation.

Add the fact that each time you enter and exit a trade you have to pay a commission of around $7 to even $15 per trade, and you are already $14-$30 down on a trade the minute you place it.

If you are trading with $500, and you make a good trade (meaning that you successfully predicted the price movement as well as its magnitude) you might have gotten lucky and snapped a 10% increase in the price of the stock within a few days, which would be a really great trade.

In this scenario you would have earned $50, but before you can cash in you have to deduct the commissions you had to pay, which would have been around $14-$30, meaning that your actual profit ended up around $36-$20 which is about 4%-7% return on that particular trade.

However, it is unlikely that you will always snap 10% gains on a particular stock, because what will usually happen -even if you are very accurate predicting the market movements- is that you will make a good share of mistakes, and even when you are right, the stock will not always move as much as you would have expected in the direction you had planned.

Therefore, in order increase your chances of being profitable and growing your account, the best way to trade the stock market is through binary options. Why?

Well, because binary options allow you to trade in smaller sizes without having to worry about commissions, you can achieve returns around 70%-80% on each trade, and in order to do so you only need to be right about the direction of the price, regardless of the magnitude of the movement.

Indeed, when you trade binary options (also called “all or nothing options”) the payout for each call or put option is fixed, meaning that unlike traditional options, your profit will always be 70%-80 of the invested amount regardless of how many points in the money you are, as long as you are in the money even if it is by $0.001.

On the other hand, binary options offer the advantage that they can be traded hourly, meaning that you can buy contracts that expire within 60 minutes thus allowing you to realize 70%-80% profits fast (something simply impossible to achieve trading stocks in the traditional fashion).

This certainly makes it easier to make a profit trading the stock market, because on one hand, all you need to do is determine the direction of the price movement, and on the other hand, you can get a far higher return on your investment without having to risk 100% of your account.