When it comes to stock options, volume isn’t always a good thing. In fact, last week, of the five most active stocks when it came to options being exercised, three of the five moved downward. The smallest of these movers was by a loss of more than 9 percent. That was for the pharmaceutical company, Pfizer. The two other companies in the top five that lost value both dropped by more than 30 percent. Of the two assets that gained value, only one was a major company: Cisco. Cisco gained about 5 percent.
The importance of looking at executed options when you begin your trading day is that options reveal what traders were thinking in the past. If an option is executed at a gain, that means that the company has increased in value. Remember, traditional options do not carry with them the necessity of being executed as binary options or futures do. However, options do have expiries just like binary options do, and this means that they either need to be executed before the end of the contract, or they will resolve unfulfilled. For these contracts to have been executed indicates that the prices have changed enough to make their fulfillment worthwhile, and this means that substantial movement has taken place.
If you are a binary options trader, tracking this area has a lot of potential for pointing out profits for you. Perhaps there were no stocks carried by binary brokers on the list for Friday’s biggest movers, but that doesn’t mean that options for the bigger companies like Apple, Google, Amazon, and Disney are absent. These options are out there, and watching their volume, coupled with their general direction, can give you a strong feeling for how likely a trade is to move in a certain direction. If you can see that option volume is greater than normal on Google, for example, and that the general trend of the company is upward that day, the odds are higher than normal that that movement will be consistent. In other words, when option volume is unusual, you can execute trades with a higher degree of certainty in the binary options market.
The reality is that binary options exercise independently of the asset, but because they are linked, you can look to more than just the price action of the asset in question to give you guidance about your binary options trading. Uncovering helpful tools like this can add a slight edge to your trading, even if it’s not necessarily something that will help you with every single trade that you execute. Resources like Yahoo Finance, Google Finance, and CNBC’s website can help you find this information quickly. And because you are looking at info from the day or two before, the real time aspect of it isn’t important.
When these situations do occur, they can be extremely helpful, smoothing over the volatility within your typical ups and downs. For many people, this seems like a needless step because it gets in the way of trading time. Yes, it does take time to do and this will inevitably give you less time in from of your computer executing trades. But it will end up making the time that you do spend trading far more successful by reducing the number of incorrect trades that you make. So while you’re likely to make a few less trades by doing this, the trades that you do make will be of a higher quality. In other words, you will spend less time trading, but will start making more money while you’re doing so. That’s the beauty of smarter, more effective trading. You work less, but make more.