Trading Commodities Using Binary Options
Success in commodity options trading, as with any other form of trading or investment, tends to result from being alert and knowing as much as you can about the asset you are trading. Technical analysis is the same as for any other assets in commodities options trading since you will maintain price charts with current prices and will try to identify price patterns that suggest how prices are likely to move in the future.
Fundamental analysis for commodities trading involves looking at a wide range of information because many factors can affect the price of commodities. Commodity options trading is particularly affected by world events. These can include wars, recessions and natural disasters, so you need to read news items thoroughly so you know what is occurring and can determine the likely effect on your commodity options trading.
The price of commodities when commodity trading can also be affected by weather events. Drought destroys crops and storms cause production problems while periods of good weather can boost agricultural output. You therefore need to concentrate on the worldwide weather forecasts when commodity options trading so that you can react to any events that will affect prices.
Times to trade
For a binary options trader, a big advantage of commodities trading is that the prices of the assets are extremely volatile. Historical data shows that the price of commodities changes by 30% on average a year, while some prices can change by much more than this when commodities options trading. Depending on the commodity options you trade, prices can be particularly volatile at certain times. To take advantage when commodity trading, you need to be aware when these times are. They vary depending on the type of commodities options trading but include the following:
– Crude oil. The US Department of Energy releases its weekly inventory report each Wednesday at 14:30 GMT, publishing it on its website as well as through a news web portal. The report shows the inventory figures for crude oil, gasoline, heating oil and some minor petroleum products in different regions of the US. The most important region for crude oil is Padd 2, also known as Cushing, Oklahoma, where the WT1 NYMEX crude oil contract is priced.
Padd 1, in the north east of the US, is the most important region for gasoline and heating oil because contracts for those commodities are priced there. Demand and import figures for all products are also released and different surveys summarize the varying expectations. The release of the inventory usually causes volatility in the market and so provides opportunities for commodity options trading.
– Natural gas. An inventory release number is reported by the US Department of Energy each Thursday at 14:30 GMT. This shows the amount of natural gas in storage at three regions within the country and can also cause volatility that can be useful for commodity trading.
– Copper. Demand depends on if economies around the world are expanding and this affects the price. Useful guides for commodities trading are the release of GDP reports for different countries and purchasing managers’ manufacturing releases, which indicate the level of demand.
– Precious metals. Prices of gold and silver in particular tend to increase at times of high inflation and economic instability because the metals are treated as safe havens for money. Conversely, prices generally fall during benign economic times and when inflation is low. For binary options traders, either period gives opportunities for commodity options trading.
The volatility that is common in this class of asset does mean there is the possibility of making substantial returns from commodities trading in both rising and falling w88 markets. But the volatile nature means you have to be alert to what is happening when commodities options trading and must be prepared to react quickly. This gives you the best chance of making significant profits from commodity options trading.
When you are in a position to start commodity options trading, it’s a straightforward process. Simply:
- access your trading account
- choose to trade commodities
- select the commodity you have been analyzing
- purchase a call option if your analysis suggests the price will increase or a put option if it is due to go down
- enter the amount of your investment
- confirm the trade
- wait for the expiry time to see if your forecast is correct.
Continue to analyze all the commodities you wish to trade so you always have the latest information. In this way, you will gain in knowledge and experience and will always be ready for commodity options trading when the opportunity arises.