A Good Binary Options Trading Strategy
There are not very many different strategies that can be used when dealing with binary options. There is one binary options trading strategy that is successful. It involves buying both a call, and put option on the same underlying asset. The idea is to minimize potential losses, and maximize gains. Certain circumstances must be met for this strategy to work, but if you find yourself in the right situation, you have the power to save yourself much of your potential losses, or even double your potential gains.
I'll give an example. You buy a one day call option on ABC at a strike price of $51.25. After a couple of hours, you find that your investment is currently in the money. At this point ABC has risen to $52.10. Thats a good jump for a couple of hours. You might consider purchasing a put option right now. If there is any reason to believe that ABC will drop, or even level off at this point, this would be a wise move. The amount you put into each option should be identical. This will give you a range in which you can double your profits. In addition, if the asset continues to rise, or if it drops below the initial $51.25, you will only lose a small fraction of what you might have lost otherwise. The same can be done when buying a put option first. If the investment is initially in the money, consider buying a call option of the same value, on the same asset. A simple binary options trading strategy to limit losses, while maximizing gains. I'll provide a better example below.
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Binary Options Trading Strategy Example:
This is an example that uses the imaginary stock "ABC". The value of the stock, and the amount invested are fabricated for informational purposes only.
One Day Call Option For ABC with 72% Return:
Amount invested: $100
Value of ABC at Strike Point: $44.25
Lets say you purchased this option at 10 am.
Lets say at 2 pm ABC is valued at $46.10.
That is a large increase for 4 hours. It might be somewhat unexpected.
You should consider buying a call option for $100 to double your profits if the stock drops from there.
One Day Put Option for ABC with 72% Return:
Amount invested: $100
Value of ABC at Strike Point: $46.10
So now you have the two options above. They both expire at the same time, at the end of the day. There are three possible outcomes, but only two possible financial outcomes. Lets see what they are.
First:
ABC expires between $44.25, and $46.10.
Result: Both options end in the money. Profit of $144 for total returns of $344.
Second:
ABC expires above $46.10
Result: Call option ends in the money for returns of $172. Put option ends out of the money for loss of $85 (assuming you use Anyoption which guarantees a 15% return on out of money options) for a total return of $187. Not a terrible loss on an investment of $200. Net loss of $13.
Third:
ABC expires below $44.25
Result: Call option ends out of the money for a loss of $85. Put option ends in the money for returns of $172. Total returns of $187. Net loss of $13.
This is an example that uses the imaginary stock "ABC". The value of the stock, and the amount invested are fabricated for informational purposes only.
One Day Call Option For ABC with 72% Return:
Amount invested: $100
Value of ABC at Strike Point: $44.25
Lets say you purchased this option at 10 am.
Lets say at 2 pm ABC is valued at $46.10.
That is a large increase for 4 hours. It might be somewhat unexpected.
You should consider buying a call option for $100 to double your profits if the stock drops from there.
One Day Put Option for ABC with 72% Return:
Amount invested: $100
Value of ABC at Strike Point: $46.10
So now you have the two options above. They both expire at the same time, at the end of the day. There are three possible outcomes, but only two possible financial outcomes. Lets see what they are.
First:
ABC expires between $44.25, and $46.10.
Result: Both options end in the money. Profit of $144 for total returns of $344.
Second:
ABC expires above $46.10
Result: Call option ends in the money for returns of $172. Put option ends out of the money for loss of $85 (assuming you use Anyoption which guarantees a 15% return on out of money options) for a total return of $187. Not a terrible loss on an investment of $200. Net loss of $13.
Third:
ABC expires below $44.25
Result: Call option ends out of the money for a loss of $85. Put option ends in the money for returns of $172. Total returns of $187. Net loss of $13.
You can see from the example above how using this binary options trading strategy can really maximize profits, and minimize losses. Of course, you have to find yourself in the right position to make this work. If you do, it can be a very valuable tool.
