Binary Options commodities trading

One trading opportunity that has basically only opened up for private investors in recent years is trading in commodities. Until about five years ago, it was hardly possible for private investors to invest in commodities or speculate on their price development. Today, on the other hand, investors even have various options at their disposal for speculating with commodities.

Binary Options commodities

In principle, the term commodities cover all goods that have a value and can be found in nature. In the investment sector, commodities are divided into different groups, such as precious metals and agricultural commodities. Among the most popular commodities are precious metals gold and silver as well as crude oil. However, there is also increasing speculation on various agricultural commodities, such as wheat or corn. Binary Options give investors the opportunity to profit from changing commodity prices, among other things. But how does “classic” commodity trading work and what opportunities and risks need to be considered?

Commodities which are popular for Binary Options Traders:

  • Gold
  • Silver
  • Oil
  • Copper
  • Corn
  • Platinum
  • Palladium
  • Coffee
  • Soy Beans
  • Natural Gas
  • Wheat

In what ways can speculation with commodities be carried out?

If you want to speculate with commodities, you usually cannot do so directly. The only exception is precious metals because by buying gold coins or silver bars you can of course also invest in these precious metals directly. The purchase of a ton of crude oil or a ton of wheat, on the other hand, in physical form is completely unrealistic for the private investor.

For this reason, investments in commodities are usually made through certain financial products. There are two main products to be mentioned here, namely CFDs (Contracts For Difference) and Binary Options. Trading on the commodity futures exchange is also possible for private investors today. CFDs are special contracts that, similar to options, can have different underlying assets, for example, commodities.

The trade does not take place here directly over the stock exchange, as it would be the case for example with shares, but the customer closes a contract with the bank or the broker through the instrument CFD, who in turn buys the respective values and “transfers” the rights to these values to the customer through the CFDs. With the options, it looks similar to the construction. For example, if you think that the price of crude oil will rise in the near future, you can buy a CFD or even a (binary) option with crude oil as the underlying asset.

Which Binary Options broker offers commodities?

Not every Binary Options Broker offers commodities to trade with. After doing long research I found 3 different brokers that allow you to trade commodities as an underlying asset with Binary Options. In addition, these brokers are regulated and trustworthy. You can start with a free demo account:

Broker:

Rating:

Advantages: 

Start trading: 

IQ Option logo
5/5

+ Yield up to 100%
+ Best platform
+ 24/7 support

Deriv logo
4.5/5

+ Yield up to 95%
+ Auto trading (bot)
+ MetaTrader 5

Pocket Option logo
4/5

+ Yield up to 92%
+ Bonus program
+ Accept any clients

How to trade Binary Options Commodities:

Trade on rising or falling commodity prices

First of all, you have to choose a commodity for trading. Then it is important to find a trading idea. This can happen by using fundamental data or using chart analysis. I discuss this late in detail. If you got a forecast and a trading idea you can set up the expiry time of the Binary Option. Start trading from only 1$ and if you want to invest more money – you can do it in the order mask. Now just press the button for trading and wait for the result.

  1. Choose a commodity you want to trade
  2. Generate a trading idea (forecast of the price)
  3. Set up the expiry time
  4. Invest the amount you want
  5. Open the trade (higher or lower)
  6. Wait for the result
  7. Earn a high yield or lose the investment amount

What opportunities and risks does speculation in commodities

Trading in commodities is certainly one of the most speculative investments that private investors can make. One reason for this is that the prices of many commodities can move within a relatively wide range in a short period of time, i.e. they are quite volatile. In addition, it is of course very difficult to estimate how the price will develop in a few days or weeks.

Since fundamental data on some commodities is rare, a large part of the price development is now also due to speculation. Whether, for example, the price of a barrel of crude oil rises or falls, increasingly often has nothing to do with the relationship between supply and demand, as it should, but whether more investors speculate on falling or rising oil prices. This relative unpredictability of the price leads to the comparatively high risks associated with the investment. If, on the other hand, you have a somewhat “lucky” hand, you can quickly achieve high profits, especially with speculation on commodity prices.

Check out different fundamental data. The current economic status can drive the price of commodities.

What is important when trading binary options in commodities?

As mentioned briefly, you can also speculate on the Binary Options in commodities. You do not need to gather more extensive information at this point, as is the case, for example, when investing in Binary Options with the underlying assets foreign exchange or stocks.

Explanation of the Binary Options system

For example, if you decide to invest in a Binary Option with the underlying asset Crude Oil, you should only follow the latest news, as this often has a direct impact on the price of crude oil. For example, if there is a crisis in the Middle East, crude oil prices often rise dramatically in a short period of time. So far, most Binary Options Brokers offer only a few commodities that can serve as an underlying. However, gold, silver, and oil are now offered by almost every broker.

Since the price development of many commodities is characterized by speculation, the use of a trend-following strategy is particularly useful in the area of Binary Options. Because if you stick to it, as most other investors are currently speculating, the probability that this trend will be followed is higher than if you speculate against the current trend.

Conclusion on commodities as underlyings

As is also the case with currencies as underlying, commodities as underlying for Binary Options are also primarily used by experienced investors. Quite a few investors and experts even describe commodity trading as the supreme discipline in the field of speculation. Due to the high volatility and the great influence of speculation on commodity prices, these binary options are less suitable for beginners. It is very important to act only on the basis of a strategy, otherwise, speculation with these binary options would become a pure game of chance.

Check out my other articles about Binary Options:

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