Types of Underlying Assets

To succeed in binary options trading, an investor must choose from the myriads of underlying assets: forex, commodities, indices, and stocks. In forex binary options, the trader must choose a foreign currency pair as his underlying asset. He must be able to correctly predict its price direction in order to remain in-the-money when the binary options contract expires. The forex market is the most volatile market of the four assets. Therefore, it’s not surprising for binary brokers to sell forex binary options contracts. Commodities like oil, gold, wheat, copper, sugar, silver, and coffee can also be used as underlying assets. Commodity options are fast becoming popular but haven’t yet surpassed the popularity of forex options.

Indices like the NIKKEI, NASDAQ, DAX, FTSE, and DOW JONES are the easiest to predict. These are especially recommended for short-term binary options contracts because the indices are easily affected by political and economic news. Stock trading is highly limited to investors with a lot of money. Because it is not as liquid as the other assets, investors who want to trade stocks often opt to trade stock options instead. However, not all stocks can be used in binary trading. Popular ones include Microsoft, Exxon Mobile, Apple, Google,Yahoo, Societe Generale, and Bank of America. To mitigate the risks, it is best for any binary options trader to know his chosen underlying asset very well.