One of the most important advantages of binary options is that you can generate high profits whether or not the market is volatile. Indeed, contrary to regular options, your final payoff is not conditional to the level of the underlying asset. Even if the underlying asset price at maturity is just 0.01% above the initial price (in case you invested in an HIGH binary option), you will earn the full return of the option (that is always higher than 60%).
Traditional investors struggle in volatile markets
Most binary option and forex traders like to invest in volatile markets when it is easier to benefit from short-term trends. Traditional investors struggle when volatility of the market picks up. This is because most of them are only able to go ‘long’ on the asset price due to short selling restrictions on most traditional financial instruments. Most of them decide to stay out of the market during periods of high volatility and end up losing strong price movements that characterise highly volatile markets. Traditional investor prefer to invest in periods of trending markets, when the asset price as a chance to slowly move in one direction on a medium to long term time horizon.
Binary options are good investment instruments for volatile markets
With binary options, you don’t need strong asset price movements to generate profits; you just need to be invested on the right direction. When market volatility picks up, asset price moves tend to be fast and short-lived. Here again binary option online contracts provide a clear advantage, they can be used to capture short-term moves. Short binary option maturities allow you to benefit from these short-term trends and then be out before the direction changes again. The binary option trader is thus able to capture high and fixed returns (up to 80%) with only small and short-lived price moves of only 1%. Bianry options are thus pariculary effective in volatile markets.
Moreover, in addition to High / Low options, the best binary option brokers are offering a large range of other instruments (One-Touch, No-touch, Zone binary options) that can be used to capture quick asset price trends and generate high profits in a short amount of time. One-touch options are particularity popular in the event of a fast falling asset price that is approaching a key technical support.