Binary Options Strategies
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To understand what the strategies are for Binary options one should first understand what Binary options are.
Binary option is a type of financial trading where the payoff is either a fixed amount of options or nothing at all. There are two main types of Binary options, cash or nothing, or asset or nothing.
As in both cases there are only 2 options, all or nothing, this financial trading is known as binary 1 or 0.
For the last 30 years Binary options trading has been used as an alternative to trading systems but only since 2008 has this been viewed as a valid means of trading.
Binary options can be bought on any financial product and can be bought by either a call/up or put/down option, in other words the investor can go long or short on any financial product. The options are offered against a fixed expiry time (one hour or one day etc); the options can not be re-sold until the expiry time.
Before you begin trading binary options, it is advisable that you find a strategy. There are strategies that can increase your odds of success regardless of the market values. These types of Binary options strategies are referred to as straddles. When using a straddle you maintain the exact same amount of call and put options with the same expiry time and price. There are two different kinds of straddles, short and long.
Purchasing both put and call using the same price and expiry time will enable you to take advantage of the marketplace price variations by making the most of an elevated level of price movement. Regardless of the price increase or decrease you could still potentially make a profit. By purchasing both sides of the market you will be able to profit from the actual movement.
When you sell off your put and call options using the same price and expiry time – that is the short straddle strategy. Whenever you sell the options you should receive the premium as your total profit. Profit in this strategy can only happen within a market that is experiencing little to no volatility. If the market is to fluctuate your profits are in danger.
In the event of the market moving up or down you will need to pay for the deficit as well as for the profits. You can help this situation by re-purchasing the options when the price is right but this is not recommended by any of the well known traders.
The straddle strategies are relevant for a side to side shift in the marketplace or when there are detailed forecasts on a certain situation within the marketplace. The straddle strategies can help a trader remove any kind of “big” questions, and presents the trader with the opportunity to utilize the market for the best profit possible, as these strategies enable the trader to cover both sides of the moving market.