Trading stock indices contracts was something first introduced by the Kansan Board of Trade in the year 1982. Stock futures indices are traditionally traded by a set number of contacts. Each contact is a buy or sell at a fixed value of the index.
Trading Indices soon become popular among stock traders as they could easily choose a direction of an entire exchange based on that exchanges top stocks. Because of the opportunity for speculative gains using leverage, traders can add elasticity to an investment portfolio. Portfolio managers offer hedging protection for stock portfolios in a dipping market by trading stock index futures. Traders can allocate risk rapidly and efficiently using stock index futures.
While trading stock indices with binary options the rules change. Traders no longer need to buy set amounts of contacts and minimum investments are decided by the brokers. While trading indices with binary options it is important to remember that you are in complete control of the investment amount as well as expiry time. Remember put options mean an asset will go down, call options mean they will go up.
The 4 most commonly traded indices are listed below, these are assets that every trader should keep an eye on and should consider while news trading:
DAX – The DAX (Deutscher Aktien Index, formerly known as Deutscher Aktien-Index) is a representation of the German stock index and is a blue chip index. Containing the 30 major German corporations trading on the Frankfurt Stock Exchange, the DAX index comprises stocks including Adidas, Deutsche Bank and Bayer.
DOW JONES – Traded on the NYSE (New York Stock Exchange) commonly referred to by several names including, Industrial Average, Dow Jones, Dow 30, or Dow assembles the index to measure the performance of the industrial subdivision within the American economy.
S&P 500 – Traded on the Chicago Mercantile Exchange (CME), Standard & Poors is a value-weighted index of 500 large-cap corporate stocks aggressively traded in the United States. The stocks involved in the S&P are those of big publicly held companies that trade on either of the two largest American stock market companies: the NYSE Euronext and the NASDAQ OMX.
NASDAQ – The Nasdaq Composite is a stock market index of all the most popular stocks and securities listed on the NASDAQ stock market, this means that it has over 3,000 elements. It is vastly observed in the U.S. as an gauge of the performance of stocks of technology businesses and development companies.