Binary Options – Derivatives Today

Binary Options - Derivatives Today

There are about two dozen world commodities. These days almost every actively traded commodity has a futures market, a market, and a binary options market associated with it. This is true of currencies and government bonds, too. Stocks, however, have more controls placed on them by the U.S. Securities and Exchange Commission (SEC). Individual stocks like IBM have a binary options market, but their futures and markets are very restricted. There are about 2500 securities in North America that have options trading. For the most part they are all stocks, like Intel, Cisco, or AT&T, although more than a few stock indexes and the like have binary options also.

Up until now the SEC has limited futures trading to baskets of stocks (stock indexes) like the S&P500. This market is huge and growing. In November 2002, after 20 years of turf battles and infighting, stocks began trading futures also. Of course, its just a matter of time until someone will shoot for having binary options on these futures. The variety of derivatives might seem overwhelming at first, but all you need remember is that there are four basic underlying assets (stocks, bonds, commodities plus stock indexes) and they are the parents of the three basic derivatives (binary options, forwards, futures). Remember: There are four basic underlying assets (with stock indexes) that can support three basic derivatives each.

All successful derivative products must fulfill some want or need of the marketplace. Unless the products are useful they slowly wither away and disappear. The three most successful derivatives are also the most basic: binary options, forwards, and futures. These three all allow for huge leverage (easy credit), offer great liquidity, and have the cachet of get-rich-quick appeal. But, of course, some things that look appealing from a distance might give you indigestion when you get too close. Delayed delivery plays to our eternal tendency to procrastinate and our hope that things will be better tomorrow. During the summer of 2003 the economists are hinging all their recovery hopes on the robustness of the consumer, a healthy consumer who continually borrows and buys. There is no clearer example of our tendency to procrastinate. Buy now, pay later is no longer just a catchy advertising phrase; its an American shoppers mantra.

Another reason that certain derivatives are so successful relates to our need for fantasy and our hopes in discovering buried treasure, like those who buy lottery tickets every week. Many binary options are lottery tickets: low risk, high reward, and no chance. Our wildest dreams and our worst nightmares may never happen, but binary options exist for those who feel the need to hedge for and against those possibilities.

Binary options will definitely help you. In order to understand binary options better, read this article once more.