However, if your expertise is in the equity index markets, there is no need to wait until the next morning for the U.S. markets to open. Available are CFTC-regulated binary options that give you the opportunity to trade markets around the world.
If you are looking for a simple way to potentially earn profit from yes/no propositions, with limited risk and well-defined rewards; or if you need a small contract size to risk $75, $50, or even less than $25, then binaries may be for you.
The time is 9:15 p.m. EST. Japan’s Nikkei futures have been open for about 75 minutes and are currently trading at the 19,598 area. The table below shows the daily expiring binary options that will settle as the session closes at 2:20 a.m. EST. Hourly expiration’s are also available, although they are not shown here.
Perhaps you would like to trade Nikkei options but don’t feel that you can stay awake until expiration at 2:20 a.m. As long as you have a theory as to where the underlying will settle the day, you can place a binary trade and let the position do the work. The only thing that makes a difference is where price is at expiration; and with limited risk, a stop loss or constant management is not required.
Let’s say you think the market will settle modestly above current price at 19,610. You could buy this option strike for $49.00, risking that purchase amount while potentially earning the difference between the risk and the $100 payout, which would be $51.00 on a settlement above the strike price. This scenario offers a near 1:1 risk versus reward ratio. The market’s pricing of the option gives the buyer of this option close to a 50/50 probability of success.
However, if you think this market will settle lower – for example, below 19,570 – then you could sell that strike for $60.00. That sale price would be your profit on a settlement below the strike, while risking the difference between the $100 settlement value or and sale price, which would be $40.00.
These examples are not recommendations of specific trades, but are illustrations of how binary options could be traded on a Forex market at any hour of the day. With binaries, you have multiple choices from which to make a selection according to your own market view; and with the various strikes and expiration’s, you could create your own spread strategy using a combination of options.
Traders do not have to be limited to one equity index; binary options are available on multiple forex instruments, bringing the world to your fingertips.
Note: Exchange fees not included in calculations.