The prospect of making money in the financial markets is an enticing one to many of us. Rags to riches stories of traders coming to Wall Street to seek their fortune are the stuff of legend. Hollywood has romanticized these concepts in films for years. Now, financial markets are more accessible than ever before. It is entirely possible to mimic the success of seasoned professionals in the trading arena. Fortunately, there are conventional and unconventional ways to trade financial assets. In the days of old, trading was the exclusive domain of institutional investors in their ivory towers. Now, anyone can dabble in the financial markets at the click of a button. It’s no longer necessary to purchase assets and wait for them to appreciate – there are other more alluring options available.
Wide Range of Trading Options Available to Clients
These ‘other options’ are somewhat unconventional; traders simply speculate on the price movements of underlying assets. By forecasting the price movements of financial assets, the trader needn’t take possession of the asset. It is simply a call or put option on the future price of the asset. Online brokers such as 24Option offer these types of trading services to clients. The range of tradable assets at online brokers covers the full spectrum. These include stocks, commodities, indices and currency pairs.
Within each of these categories are multiple tradable assets. Currency pairs include the GBP/USD, GBP/JPY, USD/CAD, and the USD/EUR. There are typically a wide range of major pair, minor pairs, and exotic pairs available. Commodities include gold, silver, WTI crude oil and Brent crude oil, among others. For stocks, there are multiple options including Google, Microsoft, Twitter, Facebook, Alibaba, and a host of others. Indices are the bourses where stocks are traded. These include the CAC40, the DAX 30, the FTSE 100 index, the Dow Jones, the NASDAQ, and the S&P 500 index.
Call and Put Options: Putting Bullish and Bearish Prospects into Perspective
The important point to remember when trading the financial markets in the nontraditional way is that money can be generated in rising or falling markets. Typically, a trader must wait for an asset to appreciate before profits are realized. This is not the case in futures markets, and it is certainly not the case with trading activity at many of the leading online brokers. A trader can finish in the money provided the underlying asset has moved in the direction that the trader anticipated.
The size of the price movement plays a part in the size of the profits, but not always. What is important is direction: call or put options. Contracts for Difference (CFDs) are derivative trading instruments. They allow the trader to speculate on price movements in the financial markets. These are spread across the spectrum of commodities, currencies, stocks, indices and even treasuries. A speculative trade on any underlying financial instruments simply assesses the trader’s forecasting ability.
If the macroeconomic indicators reflect that a trade is likely to appreciate after an economic data release, the trader will go long on the asset by placing call options. A call option is a bullish option. It indicates that the expectation of a future price will be higher than the prevailing price. By contrast, if the trader believes macroeconomic data will have a negative effect on the future price of the underlying financial asset, the trader will place a put option. This indicates there is an expectation of a lower future price for the underlying asset.