Interviewer: Today we’re going to discuss Binary Options on commodities. Oren talk us through Binary Options on commodities, like oil and gold, can you talk us through the process and perhaps highlight some of the key differences between binary vehicles and more traditional investment vehicles.
Oren: Of course. Let’s first talk about commodity trading in general. Commodities are mostly influenced by geo-political events. It’s a 24/7 market. It starts off with whether the price of oil is influenced by political events, to turmoil, certain events in certain specific regions, all the way to the influences of natural disasters, hurricanes, tornadoes and so on, for example, in the U.S in 2012, this past year. Commodities in general are very much influenced by global events.
Interviewer: In fundamental analysis you take an event that has happened, for instance a natural disaster, and you see the impact on the underlying assets, such as for oil. Just how important is it for traders to keep track of geopolitical events?
Oren: It’s very important, there are two ways of looking at it. The first way is, automatically you have to say to yourself will this fundamental event affect this certain commodity. You can take anything that’s basic from your day-to-day, the oil that we use, the gas that we use, the steak that we eat, the corn, I don’t know if most of our traders know this but the U.S government has a deal with the farmers of the mid-west, 30% of the raised corn is automatically going to the production of ethanol, which we derive energy. Now we have to take into consideration how a fundamental event can affects this production of this commodity. Once we have achieved that kind of baseline , from there we can start talking about how it will affect the actual commodity price.
Interviewer: How about in the case of Binary Options on commodities?
Oren: With Binary Options on commodities you can go both ways. So you’re basically trading the event and not the commodity. Now this might be a little complicated for someone who doesn’t trade Binary Option in the day so I’ll simplify it. Very simply, for example there was political turmoil in the Middle East again, and there was a likely outcome that a war would break out. Now whether or not the supply or demand changed on that same day, you would still see a change in the price. So in cases of political turmoil it is not uncommon to see a rise in the price of oil. Now we have to take into consideration: will oil rise because of this political turmoil? Or will it stay the same. Meaning will investors speculate that because of the political turmoil there will be less oil in the world because of a certain country won’t be able to produce as many barrels per day. Or are investors going to say: this event is not going to disturb the production of oil. So we don’t need to purchase more oil that we ordinarily do. We have to take these two positions into account and try to decide which way investors are likely to go. Specifically in Binary Options we like to trade the event, not the result itself. So, we wait for the result, we’ll see the trend but it can only go up or down, that’s the beauty of binary options. That’s what simplifies it for you.
Interviewer: So you’re only having to predict the direction, not the magnitude of the movement?
Interviewer: Because sometime vanilla options are rather complicated to trade, due to there being so many variables.
Oren: Vanilla options are much more complicated financial tool to walk into. If you’re going to walk into the markets and you want to trade a certain event, again the same example from before. You’re sitting at home, you’re watching CNN, you hear that, again, political turmoil is likely to affect oil, you just log into your account on the website. And either select up or down, go with the trend, it’s completely up to you. But our recommendation is to wait for the result, right after you see the result, see how investors react to it, then take a position.
Interviewer: And what kind of commodities can traders invest in on BBinary.com?
Oren: You have a tremendous amount of commodities, the basics, gold over oil, and then from there you can go to corn, platinum, coffee and so forth, there are a lot of different commodities out there to trade on. The majors of course being gold, oil, silver. These three commodities have had wonderful trends in the past years, you can look at oil that at this time last year has a completely different price. You can look at Gold which has been rising steadily over the past few years, you can look at Silver, which is, of course, booming. In the case of each one, let’s not forget, each one correlates to another in some kind of way, so for example the Australian dollar has an automatic effect on gold. The investor might ask: “why is that?” It’s simple, Australia is one of the largest exporters of Gold, so automatically you can see the connection. The same goes for the Canadian dollar and oil, the loony as they say, now why does it have that effect? Canada is the biggest exporter of oil to the biggest consumer of oil, the U.S. So the second we see oil rise or fall it will have the same correlation effect on the Canadian dollar as the U.S dollar. Correlations are huge, they are a whole world in themselves. I personally love trading commodities, I think there’s huge potential there, if you’re a fundamental guy like me that believes that events carry on events. If you’re like me then commodities are the asset to trade in Binary Options.
Interviewer: If you start making the connections and start following the events that are happening in Gold and oil, you just log into your Banc de Binary account you can start making trades?
Oren: Instantly. I’ve actually given courses, speeches and seminars about fundamental trading in Binary Options. Once you start connecting the dots, I takes a little while, but once you start connecting them, you’re going to be in a completely different position. It’ll take a little bit of time, you’re going to have to research them, understand fundamentals, seeing how they impact certain assets and so on, but once you’ve actually connected them, and I’ve led a large group of traders to see how we connect the dots specifically for binary options, once you have connected them you’re in a whole other world.
Interviewer: Thank you very much Oren
Oren: Thank you.
George Milios is the founder of onlineforextrading.net, the binary options and forex news portal which is dedicated to providing you with all the information you need to successfully trade.