A growing number of investors consider sustainable investments for their portfolios. These investors think it’s critically important that their investments align with their personal values. There are several ways you can add sustainable investments to your portfolio, including binary options. Use these tips to add binary options to your investment portfolio.
How binary options work
An option’s value is based on the value of some underlying asset. That asset may be an investment security, like a stock. The option’s value may also be based on a commodity (crude oil, for example) or a particular currency.
Investopedia explains that binary options are based on a “yes” or “no” proposition: Will a particular asset’s market price be above a certain dollar level as of a specific date?
Assume that you buy a binary option for crude oil. You believe that the price of crude oil will be above $40 per barrel by 3pm on Friday. So, you check the trading markets for crude oil binary options. 24option explains that binary options have a buy (ask) and a sell (bid) price.
Say, for example, that you pay $70 for the crude oil option. Binary options trade at prices between $0 and $100. If crude oil’s price is above $40 at 3pm on Friday, you’re paid $100. Your profit is ($100 – $70), or $30. If, on the other hand, crude oil’s price is below $40, your option expires worthless. You would lose your $70 investment.
Binary options are a way to profit based on short-term financial analysis.
Defining sustainable investing
This investment approach is important to a growing number of investors, particularly for millennial investors. There are three components that define sustainable investing:
- Environmental factors: Companies defined as sustainable investments make a big effort to control any emissions they may produce. These companies are also focused on energy efficiency and recycling.
- Social impact: Sustainability focuses on human rights, labor practices and the rights of women. These companies believe that all of their workers should be paid a fair wage and that the workplace should be safe.
- Governance: This term refers to how the business is managed and how investors are kept informed. Good corporate governance means that the company includes outsiders on their board of directors. Board members who don’t work for the company can provide objective advice. Governance also means that the company has an annual audit performed by an outside accounting firm.
Sustainable investing protects the interest of public. These firms strive to be good stewards of the environment. They also want to treat their workforce fairly and provide financial disclosure to their investors.
Using options for sustainable investing
To invest using options, find a particular company that fits the sustainable investing criteria. If the company has a publicly traded stock, you could buy a binary option on that stock.
Say, for example, that Hillside Foods fits the investing criteria. You find that Hillside’s stock trades on an exchange and that you can buy binary options on Hillside’s stock. You can buy or sell a binary option on that stock’s market price.
Sustainable investing is an important concept for many investors. Consider using binary options to invest in companies that fit the sustainable investing criteria.