Binary Options in the Real World-Trading the German Ifo Business Climate Release
One of the ways that traders can use binary options is as a hedging vehicle. Rather than use only a stop-loss to protect against further loss, we can use binary options. The reason that binary options can be more attractive than stop-losses is that stop-losses lose money when they are hit. On the other hand, using a binary option hedge/stop loss combination, which is simply a stop-loss combined with a binary option position placed to win in the opposite direction of our Forex trade, we benefit from better protection than with a stop-loss alone because if our Forex trade fails at the stop loss, then our binary option position wins. This fully hedges our Forex position below the breakout point and ultimately leads to zero losses if our Forex trade fails all the way to our stop loss.
The German Ifo Business Climate Release is a leading indicator of economic health – businesses react quickly to market conditions, and changes in their sentiment can be an early signal of future economic activity such as spending, hiring, and investment. The release on February 23 was anticipated to affect the EURUSD pair as well as correlated pairs such as the GBPUSD. Of the two, I preferred the GBPUSD because at the time it had a stronger resistance line to break. The actual release of 95.2 was below forecast of 96.2 which triggered a sell-off of the EURUSD and GBPUSD and broke through my breakout point as seen below:
As soon as the breakout point, seen as the blue dashed line, was broken, i placed 3 trades in this order:
A) Short the GBPUSD 10 mini lots (Value $100,000).
B) Stop loss at the red dotted line (max loss capped at ~$140 dollars).
C) Bought 2 GBPUSD Call Binary Options at www.startoptions.com.
The binary option positions that I bought would have made a gain of $140 at my stop loss, should my GBPUSD breakout fail. This would offset my losses at the stop loss point. On the other hand, the success of the GBPUSD breakout would result also in a failure of my Binary Option hedge, so the breakout would have to continue past the green line, in order for the entire combination to be profitable.
So why go to all this trouble? My experience, and probably yours as well, has shown that strong event-related breakouts either win big or lose big. In other words, the loss-area between the blue and green lines in the image above, is the least likely to occur. If you agree, you should try this strategy for yourself.
Bio:
J.Mavor is an active options trader for more than 10 years and the Chief Dealer at StartOptions.com.
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StartOptions.com Forex Weekly Outlook – February 22-26
After another wild week and a very surprising rate hike, the last week of February also has its share of big events. Bernanke will continue to dominate the scene with two testimonies and revised GDP in the UK and the US will supply an exciting end to the week. And there are more market moving events. Here’s the weekly outlook.
Ben Bernanke stole the show with a surprising hike of the discount bank rate. This came after the close of the American stock markets but forex trading continues all the time – the dollar leaped. Some currencies took a bigger hit than others. This event will continue to dominate trading on Monday when there aren’t any major releases.
1.German Ifo Business Climate: Published on Tuesday at 9:00 GMT. This wide survey of 7,000 businesses has a strong impact on the Euro. Contrary to the ZEW report that is recently weak, this indicator has been rising steadily in the past year, edging up each time. From last month’s 95.8 score, it’s predicted to tick up to 96.3.
2.American CB Consumer Confidence: Published on Tuesday at 15:00 GMT. Consumer confidence impacts sales and the whole economy. In the past three months, this indicator rose from the low level it fell to, and also revisions to previous releases have been to the upside. This time, it’s predicted to drop from 55.9 to 55 points. This has a wide impact.
3.New Zealand Inflation Expectations: Published on Wednesday at 02:00 GMT. New Zealand has a high interest rate, but expectations for a rate hike like its neighbor Australia haven’t been met. A rate hike depends a lot on prices. This quarterly release will show the direction of inflation and a possible rate hike. Last quarter, expectations rose from 2.3% to 2.6%. Now they are predicted to edge up some more.
4.Ben Bernanke testifies: Happens during Wednesday at 15:00 GMT and Thursday at 14:00 GMT. After Bernanke’s shocking mini-rate hike that was made off the main hours, he’ll make his semi-annual report in broad daylight in front of two committees in Washington DC. Although he might use confusing language, his words will shake the markets.
5.American New Home Sales: Published on Wednesday at 15:00 GMT and overshadowed by Bernanke. New Home Sales took a big dive two months ago and showed everybody that the housing sector depends on government aid. It hasn’t returned to previous levels. From 342K, sales are predicted to edge up to 350K this time.
6.American Durable Goods Orders: Published on Thursday at 13:30 GMT. Orders have been revised to the upside in the past month, from 0.3% to 1%. Also Core orders have been revised to 1.4%. The positive trend is expected to continue, with a rise a rise of 1.6% in orders and 1.2% in core orders. This figure doesn’t touch the consumers, but has a long term impact on the economy.
7.American Unemployment Claims: Published on Thursday at 13:30 GMT and overshadowed by goods orders. The American job market is still fragile, and the number of claims refuses to leave the area it is in in the past months. Last week’s 473K is predicted to be followed by 466K this time. A number under 430K or above 480K will shake the markets.
8.British Revised GDP: Published on Friday at 9:30 GMT. Did Britain really return to growth? That’s a big question. The initial release for Q4 finally showed growth – but only 0.1%. Expectations are optimistic and a revision to 0.2% is expected. According to the unofficial NIESR GDP estimate, the economy did grow by only 0.1%. A drop to 0% growth or another quarter of contraction will be devastating for the Pound.
9.Swiss KOF Economic Barometer: Published on Friday at 10:30 GMT. This indicator, locally called Konjunkturbarometer, is an important composite index that usually reflects the situation of the Swiss economy quite well, and has a strong impact. From 1.77 points it’s predicted to rise to 1.77 points this time.
10.American Prelim GDP: Published on Friday at 13:30 GMT. The best is kept almost for last. There were many doubts about the rapid American growth that was reported in the first release. The second release is predicted to show only a small downward revision: from 5.7% to 5.6% in Q4 of 2010. The markets will surely shake with this release. A long term rise in the dollar’s value cannot happen without an improvement in jobs as well.
11.American Existing Home Sales: Published on Friday at 15:00 GMT. This release will be somewhat overshadowed by the GDP publication. Similar to new home sales, this figure, that accounts for more sales, is also volatile and is dependent on government aid. After a drop of 1 million sales last month, stability is expected this time – a tiny rise from 5.45 to 5.51 million.
This Market Weekly Outlook was brought to you by our partner ForexCrunch.com.
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Best Regards,
StartOptions Team
Disclaimer: Binary options trading might carry potential rewards, but also potential risks. You must be aware of the risks and willing to accept them in order to trade in the financial markets. Don’t trade with money you can’t afford to lose.
Forex Binary Options – How to use Binary Options to maximize your earnings during a false breakout
Forex options are becoming more and more popular nowadays among Forex traders as an additional tool for short-term speculations which are based on technical events. Although binaries are still young and suffer from liquidity and hence high premiums, Swing-Traders, Scalpers and Day Traders find the predetermined risk-reward ratio (~70% on trades that are “In the Money”, and 10% on trades that are “Out of the Money”,) extremely productive.
Illustration of a binary option at StartOptions.com:
We had the opportunity to discuss with StartOptions.com Head of Dealing J. Mavor:
Traders like to trade around market events or chart patterns. The stronger the event or the pattern, the more volume they will attract and improve the odds of breakout success. Quite often a false breakout can frustrate your expectations. This happens when not enough volume concentrates around the event, leading to a pullback before you had a chance to take profit. However pullbacks do not have to eat at your profits, if you trade the event with a Binary Option.
For example, on 17/02/2010 the FOMC Meeting Minutes failed to generate enough volume for the EURUSD to create a sustaining rally. As the image illustrates, eventually a pullback at 20:00 GMT to the event level at 19:00 GMT of 1.36167 would have left you with no gains and lost on the spread. Had you traded a Binary Option you would have made $70.
Here is how:
- At the time of the event you place a Put Binary Option trade on StartOptions.com. The cost of the trade is $100, returning $170 if the price ends below 1.36167 or $10 if the price ends above, It’s that simple.
- Since the price returned almost back to the breakout level, I made $170 on my Binary Option trade, whereas I would have made $0 and even paid for the spread had I traded the EURUSD directly.
So, basically what the Binary Option offers me is a way to profit on weak events, so I can target many more events. Otherwise we have to wait for GDP or other big news or patterns that generate sustaining breakouts
FX Binary Options Gameplan-USD-17/02/10
The USD was down against most major currencies yesterday as concerns over Euro-Zone debt problems waned and investors turned to riskier assets.
Wednesday in Asia, the dollar and the yen declined against their major opponents as a rally in most Asian stocks reduced demand for the lower-yielding currencies.
While the greenback fell to a 6-day low against the euro and Swiss franc, the yen slipped to near a 2-week low against its European major rivals.
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The USD looked to extend its retreat on profit taking, for all the major USD currency pairs. Look for pullbacks on the USD retreat for all USD currency pairs as a great opportunity for buying Forex Put Binary Options
to earn a predetermined reward on the USD hourly binary options of %70, with StartOptions.com you can trade the USD against major currency pairs with hourly expirations, you need to speculate only on the direction of the underlying asset within an hour, let’s say you just bought a USD/EUR at 1.3751 that expire in an hour from now even if the price will be lower in one cent (1.3750) at expiry then you’ll be entitled for the the full reward of the Forex option (70% on average). in contrast to spot FX trading in which you must speculate much larger moves in order to profit from a trade.
Click on the picture below to enlarge the USD graphs:
FX Binary Options Gameplan-EUR/USD-16/02/10
On Monday the Euro fell further against the US dollar which was much ahead of the summit that was to be held to decide futures of what steps were to be taken regarding the debt situation in Greece.
The EUR/USD crossed both its weekly and daily descending resistance trendlines, clearly indicating upward momentum. Any pullback followed by strength would be a great opportunity for a Binary Options Call trade.
Greek Economy Spells Trouble For Eurozone – Market Weekly Outlook – February 15-19
A volatile week full with hope and fear comes to an end with currencies returning to the same spots. The week ahead contains a nice mix of events from all over the world: a rate decision in Japan, employment data from Britain, and lots of American numbers, with important inflation data to close the week. Here’s an outlook for the major events in the week ahead.
The Greek crisis is far from over. While Greece is only a small country at the edge of the Euro-zone, the implications of debt and the ways to deal with it have an impact on many other troubled countries in the region that is on the brink of new recession. This also has a wider impact – debt problems trigger risk aversion trading – dollar buying. OK, let’s start the review:
| 1.Japanese GDP: Published on Sunday at 23:50 GMT. As of Q2 of 2009, Japan is out of recession. The growth rate has dropped to 0.3% in Q3, after being first reported at 1.2%. Apart from slow economic growth, Japan historically suffers from deflation, a problem that won’t be solved soon. Growth of 1% is expected now.
2.British CPI: Published on Tuesday at 9:30 GMT. This important indicator has risen sharply in recent months. The last print was 2.9%, and the upcoming number is predicted to be 3.6%, above the government’s target. Mervyn King dismissed the inflation threats and signaled that no rate hike is underway. Will he continue this stance once again? Rising inflation isn’t seen elsewhere, and it will be interesting to see the impact on the whole market.3.ZEW Economic Sentiment: Published on Tuesday at 10:00 GMT. This is a major market mover – especially the release for Germany. In the past months, it has deteriorated sharply, going hand by hand with the Eurozone’s troubles, and Germany’s stagnant economy. It’s expected to dive again – this time from 47.2 to 41.9 points. 4.American TIC Long-Term Purchases: Published on Tuesday at 14:00 GMT. Foreign investment in the US has made a leap last month, rising from 20 to 126 billion dollars. This confidence in the US economy and the dollar probably won’t repeat itself, at least not so strong – 50 billion is predicted this time. A stronger number will boost the dollar. 5.British Employment Data: Published on Wednesday at 9:30 GMT. The number of unemployed people made a turnaround in Britain two months ago and the positive trend continued last month as well. The Claimant Count Change, an early an important indicator is expected to show another “positive loss” of unemployed people this month – 14.3K. The British Unemployment Rate is predicted to remain stable at 7.8%, but economists were wrong with this figure over and over again. Positive numbers will also push towards a rate hike. 6.American Building Permits: Published on Wednesday at 13:30 GMT. The housing sector was one of the main contributors to the downturn in the economy, and is recovering slowly. The annualized number of 0.65 million is predicted to be followed by a drop to 0.62 million. The economy cannot make a significant advance without a healthy housing sector. Also note the housing starts published at the same time. 7.FOMC Meeting Minutes: Published on Wednesday at 19:00 GMT. Although the wording of the statement hasn’t changed, there was one surprise in the recent American rate decision – one member voted to change the wording and start signaling a future rate hike. When the minutes will be revealed, we’ll get to see if other members also began thinking out loud about such an option. 8.Japanese Rate Decision: Published on Thursday, in the early hours. No rate hike is expected in Japan, which suffers from deflation. The Overnight Call Rate is predicted to remain unchanged at 0.1% but the views that that will be expressed about the economy by the BOJ usually move the Yen. 9.American PPI: Published on Thursday at 13:30 GMT. Producer prices aren’t always a market mover, but this time, a rise of 0.8% is predicted, much higher than last month’s 0.2% rise and much higher than previous months. Such a rise might cause Bernanke to rethink the “extended period” wording in the FOMC Statements. 10.American Unemployment Claims: Published on Thursday at 13:30 GMT. After a surprise last week – a drop to 440K, the drop in jobs seen in the NFP can be forgotten. A small rise to 445K is predicted this time. Only another drop, preferably below 430K can boost the dollar. 11.American Philly Fed Manufacturing Index: Published on Thursday at 15:00 GMT. This important gauge has seen 6 months of improving conditions, but last month was disappointing with a drop to 15.2 points. A steady rise to 17.2 is predicted this time. 12.American CPI: Published on Friday at 13:30 GMT. The major inflation figure closes the week. Contrary to the expectations from the PPI, consumers probably didn’t see a significant rise in prices. CPI is predicted to rise by 0.3% and Core CPI, an indicator that the Federal Reserve watches, is expected to rise by 0.2% – very stable. A jump will make the markets jump, seeing another crazy Friday. For USD/CAD traders, note that the Canadian CPI is published around the same time. This Market Weekly Outlook was brought to you by our partner ForexCrunch.com. Click here to Trade Binary Options with us. Best Regards, Disclaimer: Binary options trading might carry potential rewards, but also potential risks. You must be aware of the risks and willing to accept them in order to trade in the financial markets. Don’t trade with money you can’t afford to lose. |
StartOptions.com Market Weekly Outlook – February 8-12
After one of the wildest weeks that we’ve seen in quite a while, the upcoming week seems more quiet, at least at the beginning. The echoes of the Non-Farm Payrolls will be heard during this time. Later on, some major market moving events are due. Here’s the outlook for the second week of February.
Finance ministers of the G7 nations are meeting in the remote Canadian town of Iqaluit and may release important comments that might impact the opening of the markets. The final remarks by US Treasury Secretary Timothy Geithner are of high importance. He’ll speak more than 24 hours before the markets open, so there will be enough time to digest his words. Let’s review the week’s events:
- Swiss Retail Sales: Published on Monday at 8:15 GMT. Switzerland enjoys good fundamentals but the central bank doesn’t like it at all. The SNB intervenes in the markets, but usually this doesn’t have a long lasting effect. This important figure is expected to rise by an annual rate of 1.6%, double of last month’s number. There will action in USD/CHF around this release.
- British Inflation Report: Published on Wednesday at 10:30 GMT. This important quarterly event will address the rising inflation in Britain and the central bank’s measures against it. This report, accompanied by a press conference by Mervyn King goes beyond inflation and will deal with the whole economy, which is shaky.
- US and Canadian Trade Balance: Published together on Wednesday at 13:30 GMT. This double-feature event always shakes USD/CAD. The American deficit is predicted to squeeze from 36.4 billion to 35.5 billion, while the Canadian trade balance is almost balanced. It’s predicted to stand at 0.1 billion, and could also turn into a surplus.
- British NIESR GDP Estimate: Published on Wednesday at 15:00 GMT. After the disappointing official Q4 GDP, we’ll get an initial unofficial glimpse at the British economy in 2010. Last month’s release related to the whole of Q4, and showed a higher number than the official release, but lower than economists’ estimates. The Pound will need a more serious growth to rise.
- Ben Bernanke testifies: On Wednesday. Exact time currently unknown. The head of the Federal Reserve will lay out the plans for exiting the crisis, and the emergency measures. During this testimony, he’ll probably provide an updated overview of the American economy.
- Australian employment figures: Published on Thursday at 00:30 GMT. Australia enjoys a healthy job market, and it’s predicted to remain rather steady. Australian unemployment rate is predicted to edge up to 5.6% from 5.5% but the employment change is expected o be positive again, showing a rise of 15,000 jobs. This is less than last month’s nice 35,000 job gain.
- American Retail Sales: Published on Thursday at 13:30 GMT. Both retail sales and core retails sales disappointed last month with drop of 0.3% and 0.2%. These important consumer-related figures are expected to rise this time by 0.3% each. This release, together with jobless claims, will shake the markets.
- American Unemployment Claims: Published on Thursday at 13:30 GMT. This important weekly figure disappoints every week with a number that is higher than expectations. After reaching 480K, economists expect a drop to 455K. This will be the first job figure after the Non-Farm Payrolls.
- New Zealand Retail Sales: Published on Thursday at 21:45 GMT. Although more people are unemployed in New Zealand, the consumers continue buying. Both retail and core retail sales have risen by 0.8% last month, and this trend is expected to continue, helping the beaten kiwi dollar.
- German GDP: Published on Friday at 7:00 GMT. Europe’s largest economy is the first to release GDP data for Q4. This initial release is expected to show a modest growth rate of 0.3%, much less than 0.7% that was reported in Q3. Germany led the continent with nice growth already in Q2. Now it might lag behind.
- European Flash GDP: Published on Friday at 10:00 GMT. 3 hours after the German release, the figure for the whole continent is due. This is expected to be better than the German one, and show a growth rate of 0.4%. This European morning will be very volatile for EUR/USD. Note that French and Italian numbers are also released during this time, something that might add confusion.
- American Consumer Sentiment: Published on Friday at 14:55 GMT. The week ends with a strong note – the University of Michigan provides its preliminary consumer sentiment figure, which is doing quite well. After reaching 74.4, it’s predicted to edge up to 75.2 points. This will shake the markets before the weekly close.
It seems like another wild week in front of us with many macro events that can help us get more insights about the economy recovery,
With StartOptions.com binary options trading platform you can speculate about the short term movements of underlying assets and hedge your portfolio with short-term binary options hedging positions.
This Market Weekly Outlook was brought to you by our partner ForexCrunch.com.
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Best Regards,
StartOptions.com
Disclaimer: Binary options trading might carry potential rewards, but also potential risks. You must be aware of the risks and willing to accept them in order to trade in the financial markets. Don’t trade with money you can’t afford to lose.
StartOptions Market Weekly Outlook – February 1-5 2010
After the surprising American GDP, the first week of February is loaded with major events: rate decisions from Britain, Europe and Australia, job figures from Canada, New Zealand and the US – the almighty Non-Farm Payrolls. Here’s an outlook for the major events of the week.
Apart from scheduled events, note the G7 meeting that starts on Friday. Comments from there and towards this event might impact the markets.
* American ISM Manufacturing PMI: Published on Monday at 15:00 GMT. This important indicator showed expansion in the past five months, reaching a high of 55.7 points last month. Purchasing managers are expected to show stability with the index stable at 55.7 points.
* Australian rate decision: Published on Tuesday at 3:30 GMT. Australia’s high interest rate is expected to rise once again, this time to 4%. This is backed by an excellent job market and steadily rising prices. While this is expected, it will still boost the Aussie, as there were doubts about it.
* American Pending Home Sales: This figure was a total disaster last month, falling by 16% (!). This came after strong rises and probably shows the impact of the effect of the government’s schemes, and also their pullout. A rise of 0.6% is predicted this time. A drop will hurt the dollar.
* American ADP Non-Farm Employment Change: Published on Wednesday at 13:15 GMT. The “mini-NFP” doesn’t always foresee Friday’s Non-Farm Payrolls, but usually moves the markets. Economists were too optimistic in the past 8 months. Last month saw a loss of 84K jobs, and we’re expected to see the job loss slashed to 41K this time.
* American ISM Non-Manufacturing PMI: Published on Wednesday at 15:00 GMT. Contrary to the manufacturing sector, the situation here is more fragile. The index was went around 50 in recent months, hardly rising above this important number to score 50.1 points. A rise to 51.3 points is predicted this time.
* New Zealand Employment Data: Published on Wednesday at 21:45 GMT. Employment figures are important everywhere, and in New Zealand they are published only once a quarter – what makes them a huge market mover. Employment Change is expected to drop by 0.1%, less than last month’s 0.8%. The Unemployment Rate is predicted to rise from 6.5% to 6.8% – weak expectations for the kiwi.
* British Rate Decision: Published on Thursday at 12:00 GMT. No rate hike is expected now – it will probably remain at 0.5%. This comes despite improving British employment and inflation. Mervyn King isn’t impressed. The focus will be on the BOE’s Asset Purchase Facility which is running out of money. If the bank expands it, the Pound will weaken. If they begin talking about a future rate hike in their accompanying statement, the Pound will rise.
* European Rate Decision: Published on Thursday at 12:45. Also here, Jean-Claude Trichet isn’t expected to move the rate from 1%. There’s too much trouble in Europe. The market will probably shake, but no long-term effect will be seen, unless he makes some dramatic statement in the accompanying press conference.
* American Unemployment Claims: Published on Thursday at 13:30. The last employment number before the NFP disappointed in recent weeks and made a retreat. It’s expected to improve from 470K to 461K. A drop below 430K is needed to be seen in order to turn the choppy trading around this publication into a bigger move.
* Canadian job figures: Published on Friday at 12:00 GMT. 90 minutes before the American NFP, USD/CAD will get its first shocker. The Canadian job market has been OK last month, keeping most of the gains in the previous month. A rise of 15,300 jobs is expected in the Employment Change and the Unemployment Rate is expected to stay stable at 8.5%.
* Non-Farm Payrolls: Published on Friday at 13:30 GMT. The king of forex is finally expected to be positive. In last month’s release for December, we’ve seen a fresh disappointing number of 85,000 lost jobs. On the other hand, November’s figure was revised to a minor but symbolic gain in jobs – 4,000. This time, the fresh number for January is predicted to show a rise of 20,000 jobs. This will be very good news. It’s important to note the revision for December and also the Unemployment Rate, which is predicted to remain at 10% for a third month in a row. This will move the markets for many hours and possibly many days.
Market Weekly Outlook was brought to you by our partner ForexCrunch.com
Disclaimer: Binary Options Trading might carry potential rewards, but also potential risks. You must be aware of the risks and willing to accept them in order to trade in the financial markets. Don’t trade with money you can’t afford to lose.
Best Regards,
StartOptions Dealing Room Team
