With regards to gold options, you will be referring to one of the options contract where the gold futures contract is used as the underlying asset. A futures contract is a trade contract which involves harmonized or consistent contracts which hold trades that involves exchanges. These are referred to as trade exchanges. In the contract, the buyer comes to an agreement to take on a delivery or deliveries of a particular amount of gold from the seller. The exchange involves both the buyer and the seller having come to an agreement on the price which is set and the delivery date.
With gold options you will have with you a financial instrument where the buyer has the right to buy or sell it but is not obliged to do so. Gold options can sometimes be confused with a futures contract whereby the investor or trader is under the obligation to do as required by the contract which binds all parties involved. Gold is one such commodity which an investor would be looking at buying at the cheapest price that they can get and then selling it at the highest possible price. This will enable the investor to gain profits and very worthwhile returns.
With gold options, there are certain factors that play their roles in determining their prices. These factors include the time or period left until the option has expired. The volatility or the instability of the market and a comparison between the strike price and the level that the underlying market is on at the time.
An Introduction to gold and the gold market
Gold is known to be the most precious objects alongside others such as diamond and silver. When trading in gold, this is where gold futures come in since it is the exchange trade involved in trading gold. Being the definitive store of value or wealth, it has achieved other roles in investments and trading such as offering a hedge over inflation. It therefore acts as an anti –inflation cover. The physical features or characteristics of gold include the fact that it is soft and dense with a bright shiny yellow luster.
The gold market involves trade in the form of buying and selling of gold based on the agreed price, delivery time and the amount of gold to be traded. In selling gold, the current, market prices usually play an important role in determining whether you would be able to sell your gold at the price you want. It would for example be more attractive to buyers if you were selling the gold at a lower price than that market value.
Trading gold with binary options
Gold has continued to increase in popularity with regards to trading in binary options. In the options market, gold is traded as an underlying asset. The volatility offered by gold ensures that its price is constantly changing. This price variation makes it a perfect choice of trading instrument for a binary option trader. With such an instrument as gold, a binary option trader would be able to get high returns over a short period of time. This option comes as the best choice for most traders and investors especially keeping in mind the fact that it would be way too risky if you were to trade the gold in the commodity market. This is because you would require lots of capital to trade gold in the commodity market. With binary options, the loss that the trader might incur does not go beyond the cost of the trading. After successfully determining the direction of the trade market, setting the strike price and finally setting the expiry date.