Binary options underlying assets There are 4 main categories of underlying assets you can trade binary options on. They are
- Commodities
- Currencies
- Indices
- Stocks
We will examine the pros, cons and differences of each asset class in accordance with the main variables that can determine which assets you choose to specialize in. These variables are
- Asset trading hours.
- What type of binary options are available for that asset.
- Payout %.
Brokers offer different payout % on different assets based on how easy it is to predict the direction the asset will move in. This means more predictable assets attract a lower payout %.
The different payout % is also determined by the amount of liquidity the broker takes on an asset, that is to say, how many traders are trading in it. Higher liquidity markets are better for the broker allowing them to offer higher payout %.
Commodities, indexes and stocks
Trading hours
These assets are available for trading from 9:30-16:30 in the time zone of the corresponding stock market or commodity market.
Payout %
These assets have stable up and down trends making the price movement easier to predict. This can be good for your win rate but, combined with the fact they have lower liquidity, it means they attract a relatively low payout % of around 70%.
Type of binary options available
They are often not available for anything other than normal 5 minute – 30 minute high/low binary options but this varies from broker to broker.
Currencies
Trading hours
Currencies are available for trading 24 hours a day from Monday to Friday.
Payout %
They are not easy to predict and get very high liquidity giving currencies the highest payout % of any asset type. For the EUR/USD that means around 80%.
Type of binary options available
Currency pairs are available for all binary option types, be it standard high/low options, one touch options and boundary options of all timeframes.
Best asset to specialize in
As you can see, unless you have a special reason you want to trade a particular commodity, index or stock then currency pairs are king when it comes to binary options trading. They are the most convenient and have the best value and variety of options available.
Having said that you should try trading all asset classes to see which one suites your trading style better. For example if you find are more profitable trading commodities and enjoy it more then you should go with that.
