cfd forex trading capital training 3

Types of CFD part 3

What are Pairs Options?

Pairs Options are when a trader is betting on the performance of one commodity or stock, against another one. Pairs are usually available every 30 minutes and for the end of the trading day.Are trader interested in trading pairs needs to understand percentages, because that is what the option is trading on. The image below shows the pair option for Gold vs Silver. Various brokers offer many different pairs for trading, including pairs of $GOOG vs $AAPL or Gold vs. Oil.

The first point of confusion for a trader when looking at the pairs option picture is the big number. What is 62.8119? The number is calculated by taking the price of Gold $1309 divided by the price of Silver $20.84 which equals 62.8119.

When looking at a chart of pairs options, the chart usually stays pretty flat. This is because pairs tend to trade in line with one another. When Gold moves higher, Silver usually follows it.

When are Pair Options Used?

Traders use a Pair Option when they believe that one asset will outperform the other asset. On a normal trading day with no news in the markets, Apple and Google with trade the same. They are both part of the Nasdaq 100 and will follow or lead the Nasdaq by a few hundredths of a percent.

The strategy to use a Pairs Option comes into play when there is fresh news coming out, like a product announcement. With news affecting one part of the pair and not the other, traders will see a divergence. Google can announce a gain in market share for search which does not affect Apple. And cause Google stock to rise while Apple stock just continues performing with the rest of the market.

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