Updated: February 23, 2017
At present, the stock market is the only place where Filipinos can do financial trading.
However, in other countries, there are are markets and products that one can legally trade for income and profit such as options, forex, and binary option.
Ask any trader about these and you will end up listening to a tirade of arguments, each of which are aimed at defending the best kind of trading available in the market.
Right from Options Trading, to Forex Trading to Binary Options Trading; the options for investments are endless.
Like the two sides of a coin, every type of trading activity has its own set of advantages and disadvantages, making it imperative to understand and decipher the best way of trading which suits your financial needs.
An option like its name, is a type of contract, which allows the buyer an option to buy or sell an underlying asset, on a certain date, for a certain price. Since it’s a type of security, it has a binding contract which carries defined terms and conditions for its maturity.
There are two types of options which are available for a buyer: CALL and PUT
CALLS usually give the holder a right to buy an underlying asset, at a specified price during any specific period of time.
On similar grounds, PUTS usually give the holder a right to sell an underlying asset, at a specified price during any specific period of time.
However, in both the cases, the buyer or the seller is under no obligation to buy or sell the contracts.
Since options are a flexible financial tool, it possesses a unique, risk and reward structure. In order to maximize profits, options can be used in a variety of combinations with different financial instruments to enhance returns on investment. The risk and the rewards of calls and puts are all in the buying and selling of the contracts.
As soon as the prices of these contracts go up on the stock exchange, the holder makes a profit. On the contrary, a holder will lose money, when a little time has passed; also, if the option is below the striking price, there is 100% loss of monetary value on the option. There is a potential risk, which is equal to 100% of the investment made.
The Foreign Exchange market is one of the largest markets in the world, and it defines a market, where different currencies of the world are traded on a daily basis.
The working nuances of Forex exchange are somewhat similar to those in the other financial markets. The only difference which emerges is that there is a parallel buying and selling of two or more currencies at the same time.
For this very reason, currencies are usually quoted in pairs, like USD/EUR, or JPY/USD etc. The exchange rate is the price between the paired currencies.
Forex Exchange carries high levels of risk, and may not be well suited for people with a weak appetite for risk.
Before plunging into this financial trading avenue, you should consider your risk appetite, your investment strategies and how comfortable are you with trading in a volatile market, such as the Forex market.
Always keep in mind that risk is an integral part of your basic investment, and you can always incur losses, at any given point of time.
Binary options deals with the movement of commodity prices, assets, Forex as well as stocks and shares.
The imminent reason of popularity is that traders have to just make one or two initial decisions, before beginning to trade in a commodity of their choice. Being one of the safest sources of financial profits, trading in binary options is a relatively popular source of trading on the stock exchange.
With Binary Options, at the time of trading, there are different types of expiry limits, available to traders. These range from 60 seconds to several months.
But before you jump onto the bandwagon and start trading in binary options, it’s imperative to decide what commodities you would be dealing in, the kind of time period you would be investing for, the investment amount as well as the kind of risk you are ready to take, while trading.
This article is written by James Ciprian, a binary options trader based in Australia.