Brands such as Facebook, Google and Alibaba have become quite popular, not only in the financial world, but with the public in general. Many of them have changed our lives in a visible way, some even have fundamentally influenced our behavior and habits. Binary options brokers have been trying to attract traders by offering options on more and more stocks to their asset lists, as these brands are easily recognizable, even by novice traders.
Attempting to examine trading on earnings announcements from the perspective of binary options requires some basic knowledge of these events. Earnings usually come out before or after market hours, so traders have already moved the price in pre or after-markets (this can be checked through various financial news websites, readily available in the Web). This is the point where a prediction has to be made – will the price continue from its new starting point, or will it reverse?
This is left to the trader’s discretion for the respective stock they have chosen. They can rely on statistics of how many times the price has continued in the initial direction, or some other indication, but what has to always be taken into consideration is any changes that brokers make to payouts in these volatile times. There might be lowered payouts for a specific period of time and some stocks might not be available at all. To be prepared, it is advised to contact your binary options broker and confirm any such changes in advance.
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Another important point in trading stocks with binary options on the days their revenues and sales numbers come out, is that stocks do tend to move with higher percentages than when there are important announcements for currencies. It’s not uncommon to see a 10% drop or gain after strong or weak numbers from companies like Facebook, Twitter and Amazon, for example.
Herein lies one of the opportunities and dangers of trading stocks around announcements – pullbacks are quite often found and they can take different amounts of time. The usual style of trading is to follow a confirmed trend. As the news swings sentiment into one direction, there will be an influx of traders who want to get in on the action, pushing the price further than usual.
But some prefer to wait for the pullbacks and trade on them when reaching the expiry time. Whichever you choose, it’s vital that you don’t swing between these styles while you’re trading, as that will quickly eat up your account. Stick to only one trading style!