Trading Commodities Through Binary Options Platforms

The commodities market has been around for a long time allowing traders to exchange commodities (raw products) on a very large scale, and the trading has usually been done on a face-to-face basis among the buyers and sellers. In today's market, the trading style has evolved into a more speculative one whether traders are dealing in stocks, commodities or other entities of the market. Many traders nowadays trade in the commodities market through binary options platforms. This type of trading is one of the simplest for making money with commodities, but it is important that you have a good binary options broker before you start.

The way a trader makes money with binary options is by guessing the price of the commodity. When a trader guesses correctly they win and if they guess wrongly they lose. Having an online broker will provide convenience for those wanting to start trading, however, it is important to have a broker that is honest and reliable. It might also be wise to put your money into different brokerage accounts rather than all into one pot. Some small online trading companies may not be regulated and therefore not as stable as the traditional trading brokers so if you use them it would be wise to keep your money in a separate account that is held by a different company.

Trading in commodities with binary options is a very lucrative business but at the same time can be very risky for beginners. There are many brokers that are safe and reliable in this type of business but there are also many brokers who don't even have a license to conduct this type of business and your investment with them is not secured or protected. What a beginner can do is to try several different brokers to compare what each of them has to offer. That way one can decide at a later date which of their brokers are reliable and can be trusted.

As with other types of trading, binary options uses techniques and methods that are very effective in making the trader a nice profit, but the trader needs to follow sound money management rules and always be aware of the risk they are taking. A good rule of thumb with any investment is, never invest more than you are willing to lose. Trading on impulse because of a boon winning streak is very dangerous. Using logic and discipline at all times is imperative to your success.

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What Do You Need to Know About Call Options?

Call options are contracts in which the buyer has the right to buy a certain specified quantity of security at a predetermined price within a fixed period of time. You do need to remember that the right to buy is not an obligation.

If you are a seller of a call option, it means an obligation to sell the underlying security at the specified price when the option is exercised. The seller is paid a premium for taking the risk that is often accompanied with the obligation. Each contract may cover 100 shares for stock options.

Buying options

Call buying is the easiest way of trading options. Beginners often start trading options by buying calls. This is popular among novice traders not just because of its simplicity but also due to the increased ROI (Return on Investment) that can be generated from successful trades.

Simple example:

Suppose the stock of ABC company is trading at $50 and a contract with a strike price of $50 is placed expiring within a month's time priced at $3. It is strongly believed that the stock may rise sharply after the earnings report is presented in the coming weeks.

Based on this $300 is paid to buy a $50 ABC option of 100 shares. Suppose the option is spot on and the price of ABC rallies to $60 after strong earnings, you may be able to make a profit of $1000.

Selling options

Instead of purchasing options, you can also choose to sell them for a profit. The sellers can choose to sell, as they may expect that the call may expire worthless and they may be able to make a profit from the premium. Selling or short call is risky but profitable if it is done in a proper manner. You can choose to sell covered calls or uncovered (naked) calls.

Covered calls - In this the short call is covered if the seller owns the quantity (obligated) of the underlying security. It is a popular strategy that enables the seller to get additional income from the stock holdings by periodically selling the options.

Uncovered calls - The option seller writes calls without owning the owning the underlying security. This is known as shorting the calls naked. If you are a novice trader then such a risky strategy is not recommended as you may lose big.

Call spreads - In this an equal number of option contracts are bought and sold simultaneously. The buying and selling is done of the same underlying security but with varying strike prices and expiration dates. This helps in limiting the maximum loss of the trader but it can also cap the potential profit that can be made at the same time.

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