In the binary options trading industry, one of the most common terms you’ll frequently utilize is the “binary asset index”. This serves as your pool of assets to trade – be it from the Stock market, the Indices market, the Forex market, or even the Commodities market. Once you get into trading binary options, getting familiar with this phrase would be among the first things you quickly learn.
Binary asset index vs. index options
When we say index options, we are referring to the traditional options trading. Regular index options are those that you trade in the traditional Stock market. Trading index options has been practiced by the more veteran traders, and it dates way back when they used to be the most common way of trading indices in the investment options market. On the other hand, the “binary asset index” means the collection of assets available for trade in the binary options market. It allows users to trade indices and other assets through a binary options platform.
The asset index is typically made up of four different classes, such as the ones mentioned below:
Currencies are usually traded in the foreign exchange market or Forex market. This market is considered to be a crucial one since exchange rates between countries are dependent on it. Moreover, there are eight major currencies that are being traded in the Forex market. These are the U.S. dollar, Euro, Pound Sterling, Yen, Swiss Franc, Australian dollar, Canadian dollar, and New Zealand dollar.
In the Forex market, currencies are traded in pairs. What happens when you trade them is that you buy one currency while simultaneously selling another. Currency pairs are further classified into major, minor, and exotic currency pairs. Examples of currency pairs in the binary asset index are the EUR/USD, EUR/GBP, USD/GBP, USD/CAD, and many more.
A corporation’s stock is divided into shares, which are available at a certain declared par value. When you buy a share in the company, it means that you are buying a portion of the ownership in the company. A corporation’s stocks can be divided into two categories – common and preferred stocks. Common stocks holders are entitled to voting rights, while Preferred stocks holders can receive dividend payments prior to paying dividends to other stockholders.
In the stock market, you can trade the common stocks of a company listed in the stock exchanges. With a value based on the price of the underlying stock, a stock derivative can either be classified as futures or options. Furthermore, you can trade a “call” or “put” option in stock options. A “call” option pertains to the right to buy a stock at a fixed price in the future. In contrast, the “put” option pertains to the right to sell a stock at a fixed price in the future.
Examples of stocks available for trading in the binary asset index are Google Inc., Apple Inc., Barclays PLC, Vodafone, Coca-cola, and British Petroleum PLC among others.
An index refers to an imaginary securities portfolio of a certain market or a part of it. Each index has its own calculation mechanism, which is typically expressed as a change from the original value. So when trading indices from the binary asset index, the numerical change is less significant than the percentage change.
Indices are more stable compared with other assets due to the fact that it stands as an underlying asset and do not depend on the value of individual stocks. It relies instead on the value of a group of stocks or assets. Examples of indices are the DAX-30, NASDAQ, IBEX-35, and FTSE-100.
Finally, commodities are basically raw materials used in creating products for consumers. These include oil, gasoline, wheat, gold, and aluminum among others. Another type of commodities, the soft commodities, includes sugar, coffee, cocoa, and cotton.
Most binary options platforms offer commodities, such as gold, silver, and crude oil, in their binary asset index options.