How To Play Copper With Binary Options

• After hitting record high prices in late 2010 and early 2011, copper started tumbling, and has since lost more than half of its value.
• Despite some ups and downs, the general trend has been clearly downwards. However, over shorted time spans, the commodity has been somewhat more volatile, and investors can profit from the price swings.

Although, generally speaking, copper has been down substantially –and constantly- over the past five years, investors can still make money out of it. For instance, over the past month, the price rose from around 2.02 to over 2.12. However, there is another way of making money out of the moves of the commodity, which does not involve actually buying its futures – and, thus, limits risk. The alternative is investing via binary options.

Related Link: A Different Way To Play The Euro

What Are Binary Options?

Investing via binary options is just that: Playing a binary event. “Binary options are limited risk contracts based on a simple yes/no market proposition like will the markets go up by the end of the trading week,” binary options trading site Nadex explained.

How To Trade Copper With Binary Options

Through binary options, people can invest in copper futures with relatively low collateral. Below is an example of how to trade the commodity using binary options.

In the following example, the underlying copper futures market is trading around 2.1005 and a trader thinks the price will surge the next few days – due to supply problems at large copper mines in Chile, for example. Thus, he chooses to Sell a binary option that looks something like Copper (Dec) > 2.14 (3PM), which is due to expire at the end of the week.

If this imaginary investor believes copper futures would be trading above 2.14 at 3PM on Friday, it would be best for him to Buy the binary options.

Disclosure: Javier Hasse holds no positions in any of the securities mentioned above.