The Nikkei, also known as the Nikkei 225 Stock Average, is the most recognized index tracked by the stocks listed on the Japanese Stock Exchange. The Nikkei Ticker symbol is NI225.
Nikkei Index Binary Options Trading
The Nikkei is a price-weighted index comprising of the largest 225 companies in Japan in terms of market capitalization. Nikkei is often compared to the U.S. Dow Jones Industrial Average and U.S. traders can access Nikkei futures in both dollar and yen terms on the Chicago Mercantile Exchange.
Why trade the Nikkei Index
Since the start of 2015, the Nikkei has risen by 17%, a much better performance than the Standard and Poor 500 (S&P 500) which has risen by just 3%. According to analysts, Japanese stocks are set to continue outperforming American stock for the rest of the years. Analysts are largely bullish on the Japanese Nikkei more than they are on the U.S. stocks.
Foreign hedge funds are increasingly turning toward Nikkei futures because the Nikkei is seen to be a cheaper option than other indexes including the broader Japanese TOPIX and the Nikkei counterpart, the U.S. Dow Jones. Compared to the U.S. market whose valuation is 2.7, the Nikkei is considerably cheaper with a valuation of 0.8.
For a long time, the Japanese stock market was one of the choppiest. However, according to investment strategists, implied volatility levels are significantly reducing as the Japanese economy gains gradual strength following government fiscal policies. As such, long-term investors are keen on investing in Japanese shares, as they are less volatile.
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Types of available binary options for Nikkei Index
The common binary options contract types for Nikkei Index are:
• Basic Call/Put options: You need to predict whether the price of Nikkei Index will move up or down prior to the expiry time.
• Touch options: You are required to predict whether the price of Nikkei Index will touch the given strike price prior to the expiry.
• In/Out: You need to predict if the price of Nikkei Index will remain within a range of two strike prices.
Possible signals for the Nikkei Index
At the end of May, the Nikkei ended its longest winning trend since 1988 after closing lower following two weeks of straight gains.
The Nikkei Index declined amidst an upcoming report on employment rates in the U.S. and against a background of a weaker yen.
Losses in the real estate, construction and rubber sectors in Japan have seen the Nikkei decline. The number of falling stock is currently higher than the number of advancing stock. At the same time, the Greek debt crisis has increased volatility in the global economy triggering a decline in Asian shares.
In the first quarter of 2015, Japan stock rose more than 0.8% reacting to the country’s better than expected GDP data.
Factors Affecting the Nikkei
Non- Farm Payroll data in the U.S.- Such data includes employment trends and data on the performance of non-agricultural sectors such as retail, construction real, estate, manufacturing etc.
Consumer sentiments in both the U.S. and Japan- These affect the stock performance of the component companies tracking the Nikkei.
Political trends- Domestic and global politics have an impact on market volatility and stocks react to this volatility through falling or rising share prices.