How to trade commodities with binary options

Commodities trading allows you to speculate on markets that are integral in our daily lives. Binary option contracts are a good way to trade commodities markets, as they offer limited risk and excellent opportunities to make predictions on market movements. Learn about commodities, understand what they are, and find out how you can benefit from trading them with binary option contracts.

What is commodities trading? 

Commodities trading means buying or selling raw materials that form the basis of our society, such as precious metals, energy, and agricultural products. Most commodities are traded with futures contracts where there is an agreement between a buyer and seller to honor a set price on a future date. Traders can hedge or speculate on the price of a commodity, predicting whether it will increase or decrease without taking ownership of the actual commodity. 

You can also gain exposure to commodities with binary option, call spread, and knock-out contracts, where you can speculate on their prices, again without taking ownership of the actual commodity.

Binary options are a short-term trading product that appeals to those wanting to capitalize on short-term price action, rather than more traditional longer-term methods of investing. With these contracts, risk management is built in, which is beneficial when trading metal and energy markets that could be affected by political and economic events, or supply and demand.

Call spread contracts have a floor and ceiling built into the trading product and the amount you could lose is always limited. These contracts are financial instruments that are unique to Nadex, offering the opportunity to speculate on metal, energy, and agricultural markets with defined risk/reward outcomes.

Knock-outs, also known as Touch Bracket™ contracts, use a floor and ceiling that, once hit by the indicative price, will close you out of the trade. Nadex Knock-Outs give you the opportunity to speculate on gold and oil with predefined boundaries.

What commodities can you trade on Nadex? 

Commodities generally fall into one of three categories: metal, energy, and agricultural. 

These are the commodities you can trade on Nadex: 

  • Metal

    • Nadex offers binary option, call spread, or knock-out contracts in gold, silver, or copper. These are based on COMEX/NYMEX® futures prices.

  • Energy

    • Nadex offers binary option, call spread, or knock-out contracts in crude oil or natural gas. These are based on NYMEX® futures prices.

  • Agricultural

    • Nadex offers call spread contracts in corn and soybeans. These are based on CBOT® futures prices.

How to trade commodities with binary options? 

Before you trade, you’ll want to understand commodities and, in particular, the markets you are planning to trade. This is how you’ll form your own market predictions and decide which trades you want to place. Next, take a look at how to trade binary option contracts and understand that you’ll be protected by a fixed level of risk and a clearly defined potential profit outcome. Then you’ll be ready to start testing your skills with practice trades on our demo platform before trying it out for real. 

This is how you can trade commodity binary option contracts on Nadex: 

  1. Navigate to commodities in the binary options menu within the Nadex platform.

  2. See the list of commodities contracts, the times you can trade them, and the expiration times.

  3. Click on a time period and see a list of strikes. They’re structured like a question: will this market be above this price at this time? Here’s an example: Crude Oil > 59.86 (1 p.m.) This is asking you if you believe that the crude oil market will be above 59.86 at 1 p.m., when the contract expires.

  4. If you agree with a statement, you buy the contract. If you disagree, then you sell it.

Learn to trade more markets with binary option contracts.

Get a better understanding about the basics of trading binary option contracts so you can add them into your trading plan. Discover a world of opportunity with binary option contracts based on popular commodities.

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