Many different traders have different goals they are aiming for at the market and due to that fact stocks are created to accommodate all those different types of traders. General idea is in categorization of all available stocks so traders can easily find their type of stocks and use them for trading without a lot of time wasted on searching those stocks. Categories of these stocks are:
- Blue-chip stocks are your typical strong stocks of large and stable companies that have steady earnings, companies like IBM, Microsoft and so on. To earn from this kind of stocks you will have to wait for dividends due to lack of higher growth rate. Large earnings may happen rarely, and only by buying these stocks in time frames with overall depression of stocks and in bear market ( example of such case is in late 2008 and the beginning of 2009 at the peak of economic crisis ).
- Income stocks grow with their companies at a steady pace, and dividents earned from them grow as well. Companies with income stocks have large dividents payout ratio due to lack of opportunities to invest money in such companies. Over time a lot of these companies and these stocks become blue-chip stocks and companies.
- Cyclical stock are those stocks whose movement is marked with circles in which economy runs. Economic growth means the growth of these stocks and vice versa. Buying at the bottom of the said business cycle and selling at its peak is the way to make profit from these stocks.
- Defensive stocks are stable in those economic cycles, and in some cases traders may profit from them at those points. Companies that have this kind of stocks are those companies that may offer savings in the form of lower costs on some services during the times when prices generally go up, or companies that are known for their low prices.
- Growth stocks belong to companies that are in the process of expansion, where they invest all profit into the business. Expectations of high growth is there due to resources that are invested into the future of the company, which reflects on their stocks which experience high growth as well.
- Tech stocks are stocks from the companies that work in the field of new technologies. They can be found in a number of other categories, but the main difference between, for example regular growth stock and tech growth stock, is in the risk, where tech stock carry large amount of risk due to the level of difficulty in evaluation of research and development of new technologies, and the fact that technologies are evolving on daily basis.
- Speculative stocks are recognized due to their lack of continuity in earnings, where it can either have small earning or it varies from time to time. Only reason for their use on the market is because they hold big potential.
- Binary options stocks found through best binary option robot and similar adds belong to different type of trading altogether called options trading.
The potential of stocks is expressed through wide use of the same on many markets. Stocks are considered as best option when it comes to investment. Stocks of larger corporations are more valued and used than the stocks of smaller partnerships ( this can be clearly seen in the case of software and sites like binary option robot ) due to 3 main reasons:
- When you buy stocks of a company you are free from any problems that arise in that company, because only loss you can suffer is through the price of the stocks, you are liable for those stocks only.
- Corporations profit from stocks through their sale. They can earn a lot of money by issuing stocks and selling them to interested parties.
- Control over the company is solely vested on a vote chosen board of directors. Some stock types hold voting rights while most of them hold no rights in voting.
Disadvantage of the issuing stocks is in regulatory bodies and laws, because they require many reports about stockholders. The main issue with this is that those reports must be sent to numerous government agencies.
There are few rights you will receive once you by common stocks of a company:
- You will receive a right to certificates which will be used as evidence of your ownership of the stocks ( paper certificated are in later years exchanged for electronic certificates ).
- Every stock has to carry at least one vote on meetings of stockholders ( but that is not always true, because there are stocks that are issued without this right ).
- You will of course have a right to sell the stocks you own whenever you want, and you will receive declared dividents whenever they are given away.
- General right about the state of company and availability of financial reports are mandatory and you will have no problems in obtaining them.
- The right to buy new stocks before they go on the market.
In most cases common stocks come with the right to vote in election of board directors. As it was aforementioned there is a rise in stocks that hold no voting rights, but their value is smaller than the stocks that have those rights. Ability to vote on these elections is called voting privilege, but you have limited options with your vote, for example:
- No shareholder has a right to choose nominees for the said election.
- Withholding votes is useless due to rule that a director can be chosen without majority of the votes. This is not the general rule, because a number of companies do require majority for election.
- If your stocks are held by a fund you have no rights in voting, because the manager of the fund has all those rights.
- SEC is working towards the law which will force companies to include shareholders opinion in nomination of people for the elections of the board of directors, but it is not all clear yet.
Apart from the voting privilege which allows most of the stockholders to vote when it comes to election of board of directors, stockholders hold few more rights and companies are obliged to follow through with them.
There are many rights that are made around information provided by the company to its stockholders. Basic right that every stockholder has is the right to receive financial reports and other information regarding the financial situation of the company. There are also rights that allow stockholders to receive a list of other stockholders as well as gain minutes on the board meetings but these two rights are rarely used.
Pre-emptive right exist to give a stockholder advantage when new stocks are issued. In latest years this right became rare, but there are still some companies that have it. But, this is not as simple as it sounds because there are some restrictions when it comes to pre-emptive right. In past, this right was used so the current stockholders can maintain the percentage of company ownership by buying additional percentage of newly issued stocks. So, if a stockholder has ownership of 5 percent of the company through stocks he had a right to buy 5 percent of newly issued stocks. If a company wants to reduce the percentage some stockholders have in ownership they can pay them not to exercise their right to buy those stocks. Or they can simply exclude this right and publish their newly issued stocks directly to the market, negating all privileges current stockholders have.
When it comes to dividends the company is not obliged to declare them and in that way pay certain amount of money through them to all of the stockholders. They can decide against dividends and invest all of their profits into the growth. But, once they declare dividend, they have the obligations to send appropriate amount of money ( it is calculated by the single stock amount, where every stockholder will receive money according to number of his stock times the amount of money per stock ). If a company has multiple types of stocks then those stocks have different amount of money attached to them ( it comes down to common and preferred stocks which is not the subject of this article ).
In a case of retail investors they have no rights on the stocks they own because they are held by the brokers. The reason for doing this is in reduction of the costs that come with transfer of certificates and the fact that securities are at better positions if a good trading chance occurs. But, in this day and age a lot of brokers will send dividends to their investors and they will organize a way for them to be able to vote. There are some issues with this system when it comes to voting but trading evolves and new ways rise from day to day.
When it comes to binary options ( search Best Binary Option Brokers sites for relevance ) owners of those hold no rights other stockholders and even owners of other options have.
Reason for a text like this is due to the difference between different kinds of options, in this case difference between all other and binary options. Even if you happen to be experienced stock market trader you wouldn’t be able to trade binary options from the get go. You would be just like every other beginner due to the nature of binary options trading. So sit back and let me explain everything in this rather short but intriguing article.
One of the many differences between stock and binary options is the lack of intrinsic value in binary options. Stock option can be excercised before its expiration date, all depending on its intrinsic value, which is not the case with binary options. Prematurely exercised stock options may yield less money but profit can be made that way as well. Binary options have no intrinsic value, only time value and due to that they can’t be exercised before their expiration date with profit. Price in the binary option may exceed your choice in which case that makes you in-the-money, but you can’t exercise that option and collect your profit before the expiration date occurs. That price can fall out-of-the-money until that expiration date which neutralizes your profit and you are left with loss. So the expiration date is what is important, every point of time before it is irrelevant which excludes intrinsic value and only time value matters. you can neutralize or lower a chance of loss if you perform an opposite option on the basis of same asset.
In normal binary options trading, without leverage, you can’t win or lose more than 100 dollars ( or euros if you trade over European brokerages ). The price of the option is greater the more time until its expiration date is left due to higher probability of it ending in-the-money. Price also depends on the current state of the price compared to the strike price of the binary option of your choice. Ultimate goal of that is to have price ending in your favour, thus receiving winnings of full 100 dollars. When I say earning full 100 dollars that actually means returning back the premium you invested in addition to premium from the trader that places opposite option on that same asset. So, once you lose, you lose only your premium which goes in the hands of those that won with opposite binary option from yours (I should note that this is not the case in all binary options trading and that there are other small components of the trading, like fees that will be omitted in this article. Once you have won you will (in most cases) be notified of your winnings by an email, after which you will be required to pay a fee for making that settlement. If you happen to be on the losing end of the trade then there is no fee to be paid, because only winners pay them.
To gain specific data on brokers of the binary options go to the 24option.com, one of the best brokers right now.
Binary options trading has undoubtedly become a widespread method of trading all over the world. It has many advantages over other methods of trading – it does not require almost any prior knowledge and experience, it is easy to understand and it provides a lot of knowledge in economy and trading if you stay engaged in it long enough. While many people decide to try binary trading, and some of them even make it their only source of income, others argue that it is not trading at all, but just another form of gambling. Honestly, both sides are right up to some point, and whether binary trading will be trading or gambling depends solely on the person engaged in it. Many people have made binary trading their only source of income, and just like anything else, this has both a good and a bad side.
The first advantage of making binary trading the only source of income lies in the amount of money possible to earn. If you are well educated, cautious and plan your trades carefully, your guesses can be accurate in a great number of cases, and really a very high sum of money can be earned through binary trading. If you choose a reliable, registered broker, with different bonuses, high payouts and returns (e.g. Banc de Binary), your earnings may be even higher. Another advantage is that binary trading can be done from home, whenever it is convinient for you and as long as you like it. You can set your daily trading duration so that it fits your other plans. Another advantage of this approach is that you can dedicate your time to getting educated and informed about trading and market trends and conditions, which will not only increase your chances of earning, but it will also be useful if you decide to work in the area of economics, trade or business.
Just like everything else, this approach to binary trading has its negative side as well. First of all, if you want to earn money, you need to invest it first. This means that you need to invest a certain amount in the beginning, if you want to have a sufficient turnover. Then, even though binary trading is simple to understand and execute, it still requires a serious amount of knowledge if you want to be successful. This means that you need to know the concept of trading and be informed on the market conditions before you invest money and start trading, or otherwise your risk of losing the money is higher. While we are at the risk of losing money, what also makes it higher are many scam brokers and binary robots. As mentioned above, it is important to choose a broker registered with official trading authorities, that has good reputation and good trading conditions, so that you do not risk losing the money instead of earning it.