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How To Trade The Dow Jones Industrial Average With Low Collateral

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How To Trade The Dow Jones Industrial Average With Low Collateral
  • The Dow Jones Industrial Average(INDEXDJX:.DJI) tracks the performance of 30 major U.S. companies, from Apple Inc. (NASDAQ: AAPL) and American Express Company (NYSE: AXP) to UnitedHealth Group Inc (NYSE: UNH) and Wal-Mart Stores, Inc. (NYSE: WMT).
  • The index has lost more than 8.5 percent since the beginning of the year.
  • But, is there a way to capitalize from future declines or surges? Well, there always are binary options.

2016 has been quite volatile for the Dow. So, a few questions arise. Where will the index go next? Will it continue to surge? Or, will it fall once again? And, is there a way to bet on its performance over the short term without being exposed to high risks and collateral?

What Are Futures? What Are Binary Options?

CME E-mini Dow Futures are easily tradable futures based on the Dow Jones Industrial Average. These securities allow investors to profit from point movements in the index.

Investing via binary options is quite simple. It implies 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.

“Binary options offer traders ways to trade the most active stock indices, commodities, forex, event and bitcoin markets with relatively low collateral.”

Trading The DJIA Futures Via Binaries

There is a way to capitalize from the moves of the CME E-mini Dow Futures without actually investing in the index itself. By purchasing binary options, investors can bet on something as simple as: “Will the index trade above 15,950 by March?”

Related Link: Agree With Bass' China Short? Here's An Alternative Strategy

A contract would look something like this: Wall Street 30 (Mar) > 15,950 (2PM).

For those who believe the index will be above 15,950 at 2pm, buying this contract might be the way to go. For those thinking the index will be below 15,950 at 2pm, selling the contracts might be better.

To know which stocks you are actually playing, check out a full list of the DJIA’s components here.

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

Image Credit: Public Domain

Posted-In: DJIA DOW Dow Jones Industrial Average NadexShort Ideas Options Markets Trading Ideas

 

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