Benefiting from commodity trends with binary options

Those investors being interested in trading on the commodity markets must usually use certain instruments. Access to the commodity markets themselves mostly is only possible for institutional investors. By means of special financial vehicles such as binary options it is, however, also possible for private investors to benefit from trends on these markets.

At the moment, the prospects for rising prices of commodities are not everywhere very good. But those who have a good nose for binary options can also benefit strongly from falling prices. Over the past few weeks, especially gold and silver have disappointed many investors since on average, there was a slight downward trend with these prices. An important reason for that is the clear upward movement these precious metals had shown over the past months and years during the worldwide financial and economic crisis. As a consequence, it was only a matter of time until the next downward movement.

Prices for agricultural goods show particular trend

The development on the commodity markets of agriculture are particularly difficult to understand for many investors. A large number of binary option brokers however also provide underlying assets from this spectrum. For example, you can use the price of wheat or soya as an underlying asset.

In the middle and long term, the trends on these markets are determined by very many various aspects. For example, long term trends in the field of import and export such as political decisions, especially around subsidies, play an important role.

Apart from that, it is worth for investors who want to invest in binary options with agricultural goods as underlying assets to take a gander at the weather forecast. After all, it is not really rare that special events such as storms or long periods of drought lead to the fact that the harvest in a producer region turns out to be clearly lower.
Such developments quickly affect the prices which thus can significantly increase within a very short time.

Diversification of supply by investing in commodities

Another reason speaking for buying binary options with commodities as underlying assets is the diversification of one’s own portfolio. By means of the widest possible diversification of the invested capital you can clearly reduce the risk as an investor. After all, negative developments on a market do not necessarily have to affect other markets as well.
Moreover, prices which are generally falling on the share market do not necessarily mean that the prices for commodities or other investment classes fall, too.

With diversification especially the correlation of different investment classes matters. With a high correlation, the price movements of different investments are strongly linked with each other. Whereas, in case of a low correlation, the price movements of an investment class do not have an effect on the other one at all.

According to a study of the US-Investment bank JP Morgan Chase, the correlation of different investment classes is significantly decreasing at the moment worldwide. Currently, it is on the lowest level since March 2009. For investors, this means that with investing in binary options
based on commodity prices, they have a good chance of diversifying their portfolio and to add a large number of further possible profit instruments. Hereby, you do not only need to rely on very short options but you can trade securities that have a runtime of a few days or even a few weeks.