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Index Binary Options Trading-An Introduction

PostPosted: Mon Aug 27, 2012 7:12 am
by robertfx
By design, index binary options are meant to give investors an easier way to get an overall comprehension for the market performance as a whole. Today, the importance of indices cannot be overstated. In the United States for example, the Nasdaq, S&P 500, and Dow Jones Industrial Average are used as short-term benchmarks for the overall economy. Binary options brokers recognize this, and give their customers the ability to trade contracts based on these indices.

For the new trader, index binary options are an excellent vehicle for learning about financial markets in general. They can help you in gaining a much more in-depth perspective about the movements of the markets and let you get used to their volatility.
Most of the binary options brokers offer an impressive number of indices as underlying assets for trading. Covering the entire globe, nearly every major asset index imaginable is available to trade on. In practice, trading an index using binary options is exactly like any other asset. The option comes with a certain “strike price”, which in the case of an index is a specific level measured in points. If one buys an option, they are betting that the index’s level will be higher than the strike at expiry. Likewise, if they sell the option, the contract finishes “in the money” if the index level is below the strike at expiry.

Like any other investment, index binary options carry risk, which is magnified by the fact that binary options are “all-or-nothing” in nature. Regardless of this, the huge level of information and news available regarding popular indices like the Dow and Nasdaq is a considerable positive for those looking to learn.

Source: binaryoption