Binary Options Trading Strategies

When trading binary options, it is not enough that one is familiar with the basics of how to execute a trade or where to execute one, which you can learn at 10option. If you solely rely on this approach, you are in for a rude awakening. The volatility of asset prices on the stock market means you are never really sure whether you’ll hit it or lose it with every transaction. If you’re a savvy and cautious investor, then you know that there has to be a better way of doing business.

Enter binary options trading strategies. There are actually many trading strategies depending on which school of thought you follow. Terminologies like price action are fairly common in options investing and employing some of these strategies requires a detailed understanding of how asset prices normally fluctuate in a normal trading day.

In the spirit of learning a trading strategy that works for you, let’s look at what is known as a trading hedge so you can gain an appreciation on how to properly use expiry dates as a means of improving your chances of success. In this scenario, let’s suppose that you executed a $100 call option on an asset with an expiry of 1 hour and a payout rate of 85%. You closely monitor the asset price and you see that you are trending in-the-money 10 minutes prior to expiry.

The inherent volatility of the stock market means you are never guaranteed a profit until the option has fully expired. Here is where intelligent hedging can be ultimately useful. Because you are trending in-the-money, you execute a second put option amounting to $54 which has an expiration same as the original option. Now you have two options on the same asset giving way to three potential outcomes.

  • If at expiry the price ends up above the call, then you win the call but lose the put. The payout in this scenario is 85% from the $100 option for $185 but since you lost $54 from the put option, your final profit is only $31.
  • If at expiry, the price ends up below the call and below the put option, you lose the call but win the put. The payout in this scenario is $100 from the put option but since you lose $100 from the call option, you lose a net total of $46. That’s a much better outcome than if you lost all $100 without any return.
  • If at expiry the price ends up above the call but below the put, then you win both options. The total payout is $185 from the call and $100 from the put and your net total profit is $131.

This hedging strategy serves to illustrate the value of making successive trades depending on your current position relative to the strike price. It’s not an exact science but when done correctly, you can be guaranteed of significant returns within a relatively short period of time. That’s the importance of intelligent options investing and not the lackadaisical approach of only relying on a bull or bear position as the eventual outcome. Take the time to learn these strategies and some other so you can utilize these strategies in your next trades to boost your profitability.

3 Responses to “Binary Options Trading Strategies”

  1. Lucas 2 March 2013 at 1:10 pm Permalink

    Within my history class i was given a sheet of paper with $20,000 written onto it. With this particular we must buy stocks, and we’ll maintain it, as though we really bought them. We need to purchase another the least 10 and no more than 20.

    I truly require a good grade about this project. So please answer prior to the finish from the weekend.

    What stocks must i choose? The number of stocks must i pick?

  2. Lashonda 7 June 2013 at 5:31 pm Permalink

    I’ve got a job but no expenses, so for the time being a minimum of I wish to make my money work with me. I wish to do very little act as possible and obtain the greatest returns possible (duh?) I understand you will find ways to earn money without work as long as you are able to afford to begin with (like purchasing a company and having to pay anyone to keep it in check for instance) so don’t say im fantasizing which it cant happen. However I should also know everything i have to about bonds, stocks, compact disks, money marketplaces, and so forth. Longest listing of methods for getting money without having done lots of work will get best solution.

  3. Arnulfo 4 July 2013 at 11:32 pm Permalink

    I check this out ‘fact’ everywhere, why? I am 17 myself, I am into foreign exchange buying and selling and I used to be studying it off and on since i have was 15, I did not comprehend it but previously 2 several weeks I’ve really become in it. I had been pissing around on practise accounts for 30 days and stored losing, then exactly 30 days ago today I made a merchant account and made the decision to become serious (demo). I’d made my very own little methods and formulas, did some extra studying and understood my terms inside and outside. I’ve not yet used any tool like Fibonnaci aside from that MACD trend tool, thats all!

    This really is my 30 days progress (in pounds £)

    I understand inside a live account i’d have psychology factors and spread costs but I am dealing with this seriously with higher risk/management of your capital techniques. I did not think it is very difficult to be prepared for, I am inclined to make 1-3 trades each day via whether scapling method or by holding a situation and setting an acceptable take profit setting carrying out a trend/in compliance to my formula.

    How Can Lots Of TRADERS FAIL!?!?!? It’s annoying me! Thanks!

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