Trading Binary Options In Crisis Scenarios

One the great thing about trading the financial markets with binary options is the flexibility with which binary options can be used. This is most apparent when one is trading the market in a crisis scenario like when the market is collapsing.

Normally in a collapsing market, traders will be suffering losses. However because of the way binaries are structured, binary traders can still reap a profit from the situation. In order to understand the opportunities presented by binaries better, let’s analyze binaries in the light of a real life crisis scenario.

The Cyprus Banking Crisis

tradingIn June 2013, the international credit rating agencies Fitch and S&P downgraded Cyprus’ credit rating relegating bonds issued by the Cypriot government to “junk status”. With the “junk status” label tagged on Cypriot government bonds, this ruled them out as being accepted as collateral by the (ECB).

Understandably, the downgrading also led to a loss of investors’ confidence in the Cypriot economy. At the same time due to the fact that Cyprus is a European Union (EU) member country, the Euro also suffered a decline in value due to the economic crisis faced by Cyprus.

“Fleeing The Coop”

Apart from the loss in confidence in the Euro by investors, the proposal to impose a levy on deposits kept in Cyprus banks helped to fuel an already volatile situation. For many traders, the picture is clear that big changes are to be expected in the financial markets in the near term. It is crisis situations like this which have left binary traders rubbing their hands gleefully in the hope of big profits.

Opportunities Arises

In today’s wired world, it is virtually impossible not to know when the financial markets are going through a rough patch. When a crisis breaks out, we will be bombarded with news about the event from the mainstream media. Then, to follow up on the crisis, we will normally get experts discussing about the event as well as the implications of the crisis. For a savvy trader, all the information that he need to make an informed investment decision is already there provided by the media.

How Binary Traders Profit from the Cyprus Banking Crisis

With the Cyprus banking crisis, it was obvious that the credit rating downgrade of an EU member state will have an impact on the Euro. Since traders can expect the value of the Euro to be adversely affected by the crisis, binary traders who were quick on the mark were able to reap a tidy profit by purchasing put options on the Euro. Because of the simplicity of binary trading, the key to a profitable and successful trade is knowing about the interrelationship between the various forces in play in the market.

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