Currency Market Commodity Market Equity Market Indices Market Exercising Due Diligence

1. Chapter 3:
Types of Underlying
Assets
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2. One of the main attractions of trading binaries is the low cost of entry into the various financial
markets. As binary options are derivatives, traders do not deal in the actual asset and so do not need
as much investment capital as they would had they bought the actual asset.
Most binary options brokers offer traders a choice of 4 different classes of underlying assets to trade
with. Likewise at anyoption, traders have the choice to trade in the currency market, commodity
market, equity market and the indices market.
CURRENCY MARKET COMMODITY MARKET EQUITY MARKET INDICES MARKET
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3. CURRENCY MARKET
The currency market is the world’s largest financial market. According to the Bank for International Settlements (BIS),
the average daily turnover for the global forex market has reached a staggering amount of $5.3 trillion today. Due to
the volume of currencies traded in the forex market, this market is also the most popular and liquid market among
the 4 major financial markets.
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4. Nevertheless, it is worth noting that the bulk of the trading volume is
concentrated around a few “major” currency pairs such as the:
• EUR/USD
• USD/JPY
• GBP/USD
• USD/CHF
• USD/CAD
• AUD/USD
• EUR/JPY
Apart from the “majors’, trading in “minor pairs” such as the NZD/USD,
USD/ILS and Bitcoin virtual currency are also available at anyoption.
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5. COMMODITY MARKET
The commodity market deals mostly with the trading of primary products such as agricultural produces and natural
resources. They are typically classified into “Hard” and “Soft” commodities. Hard commodities refer to those
commodities which have to be extracted or mined. Examples of hard commodities include crude oil, timber and
rubber. Soft commodities are usually taken to mean agricultural produces or livestock.
Frequently traded soft commodities include wheat, soya, palm oil, coffee and beef. At AnyOption, traders currently
have the opportunity to trade in commodities such as Gold, Silver and crude oil.
HARD COMMODITIES SOFT COMMODITIES
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6. EQUITY MARKET
The equity market is usually taken to mean the stock market. It is the market where companies raise
capital through the issue of shares.
For investors, the equity market gives them a chance to own a slice of the companies that they
invested in and hence the potential to realize gains based on the performance of the companies.
Nevertheless, it is worth noting that investors gain not only through the dividends paid out by a
company to its stockholder. Investors can also gain when the price of shares which they bought goes
up in value. With binary trading, traders get to profit as long as the share prices goes in the direction
that they predicted. For example, if they predicted that Apple’s share prices will go up due to
overwhelming demand for its latest product, the iPhone 6, then they should purchase a call option.
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7. However, if traders think that the value of Apple’s share will go down due to the ‘Bendgate” scandal,
then they should purchase a put option.
With anyOption, the choices of blue chips stocks as underlying assets that as available for trading
covers a wide range of multinationals such as AIG, Alibaba, HSBC, BP, JP Morgan and Facebook. The full
list is available for viewing at http://www.anyoption.com/trading-assets.
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8. INDICES MARKET
To measure the performance of a
market sector, financial experts had
come up with the idea of using a
market index. A market index is an
indicator that tracks the performance
of a group of stocks which are
representatives of the players of that
market. For example, a transport index
will include the stocks of all the major
railway companies as well as transport
companies. Since these companies are
the major players in that particular
industry, the overall performance of
these companies will show in general
the state of that market sector.
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9. Market indices are popular among investors since they only have to be concerned about the bigger
picture rather than all the nitty gritty details about all individual companies involved in the sector that
they are interested to invest in. At anyOption, there is a wide selection of indices, both local and
international, which traders can trade in. Some of the popular ones include the DAX, Dow Jones, FTSE
100, Hang Seng, NASDAQ, Nikkei 225 and S&P 500.
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10. EXERCISING DUE DILIGENCE
While nobody can claim to know all the underlying assets intimately, it is still important that traders
take as much time as possible to get acquainted with the underlying assets which they are interested
to trade in. This is because the prices of these assets are affected by different factors. For example, the
output of soft commodities like grains is dependent upon the weather. Floods or drought can easily
wipe a year’s harvest resulting in shortages in the market hence pushing prices up. Alternatively, civil
unrest in major oil producing countries like Saudi Arabia can easily push up crude oil’s prices up to the
stratosphere.
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