To fully understand market dynamics, the fair value of financial products and services purchased and sold, it is necessary to have a thorough understanding of stock market developments and key features. Binary options play a dominant role in financial and economic terms and for the optimal management of online trading. Below we will explain in detail the features, providing some strategies to be used to dive into the investment of options.
As we did earlier with our introductory article on strategies for online trading, in which we attempted to illustrate how to enter this world of risks and investments, today we focus on Options and their sector.
Strategies for trading binary options become critical in a market where winnings are as easy and immediate as losses. I advise you not to risk losing money without any kind of guarantee or study pre-investment, especially when we talk about the possibility of losing large sums of money in a very short time. It's better if we start to face a serious training path (maybe starting from the reading of complete and reliable texts).
Want to find out how to earn money with binary options? You must be aware that in this case everything remains limited to a fixed quota, which therefore has no change during the market changes, or is null and void. Also referred to as digital, they are essential in managing investment risks and predictions. Unlike, for example, investing in Forex (also called the "foreign exchange market", or "currency market", where you exchange one currency for another), options lose the same money that you have invested, so you don't run the risk of losing more. A peculiarity of binary options strategies is to have graphs useful to invest with the same for each product placed on the market.
Another strong point is the ability to determine the increase or decrease of an asset in a given and limited period.
Investors come in a variety of forms, from newcomers to the world of financial investment to stock market veterans. Investors are, however, primarily those who want to earn money with options in an immediate and fast way. But what are the best strategies in the binary market? The main types currently present on the stock market are as follows:
The most frequent and widespread types are certainly the first, the cash-or-nothing.
This world is truly vast and full of information that a good online investor needs to understand perfectly to obtain competitive results. When investing in binary options the opinions and comments are quite unanimous. First, it is a financial instrument in which a buyer will receive a return, a profit, which is based on the accuracy of the forecasts made. These forecasts relate to the development of the price of a specific share, or of an underlying asset thereof, over a predefined period.
The mechanism is quite simple and intuitive. The investor first chooses the asset or security to invest in; at this point, one considers what are the elements for making a good-term investment:
The ways in which these simple three elements combine will determine the type of economic return that can be achieved and the period in which it can be achieved. Consulting forums that deal with binary options can result in a strategy hovering between professionalism and amateurism. Beware of the reader.
Another very important parameter when investing is the expiry of options. In fact, whatever type of binary option is chosen, it will have a constant characteristic that precisely a precise duration within a given time limit. Therefore, the deadline will determine the period within which the operation can be managed: from 15 minutes to 24 hours. This is a truly minimal amount of time: in fact, the main characteristic of binary options is their speed compared to other binary and financial trades.
What is meant by 60 seconds? They represent a peculiar classification of options with a term of 60 seconds; with these it is quite simple to do scalping, provided you set a forecast very quickly, indicating the investment.
Let us immediately make it clear that we are talking about a technique that will give us the opportunity to make great (unguaranteed) profits, all using a tool that is easy to understand and that can count on many strategies at the same time.
Here are some of the best:
If used in the most correct way they will give us the chance to earn 65-70% of the invested capital. The revenues will be endless as they will come from the trader's dispositions and from the market's indications.
Let's start with an example that will make your binary options strategy easy to understand.
Suppose you bought a call option for $100 and that, the same, a few minutes after the close of trading is worth about $107. We're acting "in the money", so we're earning a payoff of around 75% with the options. This guarantees us, unless the imponderable, a return of $ 75.
At this point let's start with the "straddle": we buy another put option (from the same market) at $107 with a 75% payoff and investing $100 as in the first case. We have thus created an unusual situation, and let us analyse it.
In the short interval preceding the closing of the security we have purchased, its price may vary in the following ways:
In conclusion, it will give us the ability to double the profits from binarieswitching and limit losses to 10%-25% of the investment made.
One of the most famous daily strategies is undoubtedly that of the cage. This technique was conceived several years ago by an American trading enthusiast and has only recently arrived in Italy. Its name is closely linked to the objective that it sets itself, namely that of "caging" the price in a predetermined area. For its application it is advisable to invest at least 200 euros and use a binary options broker that provides a small refund of losses, such as OptionTime. We will also use the EUR/USD currency pair.
We invest the first 100 euros in a euro/dollar call option with a maturity of 15 minutes and a high return of 80%. We are monitoring what is going on and, as soon as we see that our option is moving in the right direction, we invest the remaining EURÂ 100 in the same put option and wait until it expires. This strategy therefore makes it possible, if properly applied, to earn EURÂ 160 if we manage to put the price on hold. Otherwise we would have only risked EUR 10.
According to some experts, there would be a loophole in the trading world (or as someone would say, a bug), which would ensure a secure profit. Let's clarify this concept, to understand if the loophole in online binary options trading a legend is or not.
Are there any strategies to earn money safely? Absolutely not, nor are there any gaps in the system that guarantee 100% winning investments. In practice, the so-called holes in the binary options system are the result of inconsistent rumors, according to some put into circulation by blog owners or book writers on the subject.
To sell a few copies, these alleged online finance and trading experts have mocked the insubstantial legend of binary options holes, to attract the most unfamiliar investors. Another reason is to sell ad hoc courses where you can teach the strategies to earn with options trading and therefore allow participants, who pay a lot of money, to take possession of this holy grail of trading.
These types of investments allow an economic return within the limits allowed, more or less quickly, but never safely. Trading platform operators, however, do not bother to curb rumors and legends about binary options cracks, as they also earn on the shoulders of those who start "playing" on the stock exchange believing it possible an easy and safe economic return.
For investors, this is therefore a definite loss, partly of the money they invest in the courses or texts of these phantom gurus; and partly of the loss in the case of a mistaken investment which, when the shares mature, becomes passive.
Just as there are no flaws, there are also no tricks to secure immediate gains through binary options. The only way to earn money is to learn certain strategies, initially opening an account on flat trading forms, which allow a trial period through simulated investments. It will be possible to apply some trading strategies without the risk of giving real money to those who do not deserve it.
For this reason, it is worth relying on a trading system, able to report when and how to make financial movements in the risky world of traders.
What does that mean? It means following a presumably successful tactic on the financial markets. A winning trading system therefore consists of an investment plan based on the best indications on when to buy shares and when to sell, thanks to data from economic indicators and oscillators, technical analysis (deepen concepts such as support and resistance and elements related to the stochastic oscillator) etc.. In short... the basics of money management.
According to what has been said so far, the system consists of a series of rules and indications to go and operate in a winning way on the markets, on which a program is built that can then be processed by appropriate computers, in real time. It is therefore 90% automatic trading: the "human" trader, in fact, will simply have to enter some parameters and decide the rules of the game, after which he works automatically.
The binary options market is driving the world economy to strategically different shores than those to which investors were usually "docking".
Let's say that the financial market is undergoing strong transformations that will soon lead even the less expert to try to climb to success.
Hence the mission of our site. Let's try to make concepts less complicated, concepts that could actually, at first sight, scare a lot. Obviously we never tire of stressing that it takes a lot of patience, study and dedication.
Today we are talking about the complex straddle strategy for binary options, which allows you to bring home a gain thanks to the increased volatility of an underlying. It is of course a perfect technique when the investor assumes that the underlying has a strong price movement.
One of the secrets of successful trading is to understand the trend of binary options.
In fact it is important to know this data because all the prices that we have to evaluate at the time of investment operations move in the direction of the trend, which can be considered the real strength towards which prices move.
The trend in binary options makes us understand that it is more likely that it will go in the same direction instead of changing it.
This also leads to an understanding of the concept of strategy, as each being is realized on the basis of results that have occurred over time. If the binary options trend has been upwards in the past when certain situations occur, then it is at least likely that this trend will be repeated over time when the same situations occur.
As they say, history is also repeated in trading.
The trend also in the case of binary options represents the market trend based on a series of movements recorded through technical analysis.
In our case, we need to analyze three types of trends with respect to binary trading strategies.
A positive trend is when there are increasing highs and lows. Looking at the graph, we notice that there are some so-called "Peack & Troughs". What does that mean? In terms of market transactions, Peaks are the highest level reached at a given time by the option, while Troughs, or valleys, are the lowest level. Therefore, in the case of a bullish positive trend for the options, we have the occurrence of events in series of increasingly higher peacks and troughs.
If, on the other hand, there are decreasing maxima and minima, then we have a negative downward trend.
Finally, we have the lateral binary options trend when prices remain within a specific range and therefore both peaks and valleys are around quite similar, if not identical, price levels.
Trends, Binary Options and Trading Market
Every time a trend repeats, we talk about the trading market, unlike when it does not, and in this case we talk about the trendless market.
Remaining in the discourse of the trading market, we have the possibility to subdivide it in different typologies
Obviously it is essential to operate with the favorable trends with regard to the binary options market, thus avoiding the mistake that many traders make that they go to "overbought" at times when there is a strong downward pressure.
This is a fundamental concept, especially for those who follow the trend with binary options. Tracing occurs when the trend reverses up to 50% and then resumes the trend it had. This is a constant in the market, and does not represent a reversal of the trend but a simple temporary correction.
For example, a trader can take advantage of corporate uncertainties (in the event that they become the protagonists of communications such as the presentation of a balance sheet) by putting up a straddle before official communications.
In order to make the above operational, the investor must simultaneously purchase a call option and a put option that have special requirements: they must present the same strike price and maturity. The cost will correspond to the prices paid for the purchase of the options while the gain will correspond to the movement of the underlying. It is clear that, in the event that the desired increase in volatility does not occur, options will lose value as time goes by.
It should be noted that it is also possible to become sellers of this strategy (and therefore not only buyers). The maximum loss in this case is unlimited (while with the purchase is limited to the premium faced for the purchase). In this case, this strategy must be used if you are certain that the underlying will not become more volatile.
On a practical level, if we place an exercise price of 14 euros, with options expiring on a specific date, obviously the most profitable position will occur when the price of the underlying security varies between + and - 1.25 euros.
This is for various reasons related to the market value of put and call options as part of the overall return.
The straddle strategy, in fact, to give profit, requires interesting changes in the price of the underlying security: in short, to earn money with the straddle binary options must refer to an underlying with a high volatility.
We are talking about a strategy similar to the previous one because it is based on the purchase of a call option and a put option. Unlike straddle, strangle is based on different strike prices (option expiration remains the same).
Again, it is advisable to use such a strategy when high volatility of the underlying is expected. The cost is also translated for this technique in the price incurred for the purchase of options while the gain will correspond to the movement of the underlying.
Even with straggle you can become a seller. The maximum loss in this case is unlimited (while with the purchase is limited to the premium faced for the purchase).
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First of all, let's immediately clarify that these strategies derive from the straddle. Then it is important to underline that they are used in order to be able to profit both from the directionality and from any volatility of the underlying. An investor using these techniques expects that there will be a lot of movement in the short term, estimating the direction in which the underlying will go.
In practice we will have a strip strategy when buying one or more call options (and the double consideration of put options) with the same strike price and expiration while we will have a strap strategy when buying one or more put options (and the double consideration of call options) with the same strike price and expiration. In any case, the maximum cost of these operations coincides with the cost of the options (this is obviously a larger investment because more options are being considered).
This strategy can also be used for buying or selling. How does this technique work? Let's say that the buyer expects the market to compress prices and proceed slowly until the options expire. As for the seller, however, we can say that his position is summed up with the belief of a sharp rise in prices before the expiration of contracts.
This type of technique can be used with both calls and put options (the expiry date of the options must be the same for all contracts that are used).
After dealing in detail with the world of binary options, it is time to get into the picture, trying to fully understand how you can combine the different types of options with the underlying and/or with other options yet.
It should be emphasized, as a premise, that these techniques help to protect themselves and gain even if the market remains lateral. Obviously, we also need to be able to exploit macro-economic events in order to be able to enjoy the possible volatility of our underlying.
What makes option trading so appealing? We don't have the arrogance to answer in a unique way but certainly we can say that its varied and complex attitude to versatility gives the idea of why many winning traders continue to point strong.
A position in the underlying underlies the option under this strategy. The strategy is in fact composed of two different positions:
With this strategy we are therefore better protected (compared to the simple sale of the derivative) because, if the buyer requests the delivery of the underlying, we will find without problems what we need to honor the contract.
To implement this technique, it is recommended that you always keep the option to sell last. Why? In order not to leave the position uncovered (it should be noted that the greatest advantage is obtained when the underlying remains in the side).
In order to make the best possible use of this technique, it is therefore advisable to apply it at the time when the underlying is assumed to remain stable until the end of the option contract.
Covered put is a technique that assumes that the option is hedged by a short selling position. What? Of the underlying. We are therefore in the position of sellers who protect themselves. If we implement this strategy, we have a rather bearish view of the market.
It represents a financial instrument, an option contract that gives us the possibility to buy (call) and/or sell (put) the underlying with a certain price and maturity. For the record: in addition to the options already mentioned, there may also be bonds or stock indexes as underlying. The price of the underlying asset is certainly characterized by its residual value and volatility. The warranted covers accompany the journey of the underlying, increasing the different variations (according to the known leverage effect).
Covered warrants therefore represent a kind of development as far as option contracts are concerned. These are instruments listed on a certain section of our Italian Stock Exchange (one of the most flourishing in Europe from this point of view). This tool is experiencing a kind of golden age because basically:
To fully understand these alternative possibilities, you will necessarily have to deal with issues related to futures contracts (which often represent the underlying) and options (the good investor will have to understand how they are valued trying to refer to as many examples as possible).
Let's try to define the covered call writing strategy. In trading, this involves both the simultaneous purchase of the stock and the sale of a call option, and the sale of a call cover option; in the latter case, the option is covered by the underlying shares held by the investor.
A written call option is usually considered to be one call option for every 100 shares held by the investor.
These are derivative instruments based on a forward contract. In practice, the two parties agree to exchange the (underlying) assets on a given date for a price fixed at the time of trading (in practice, they are drawn up considering a general standardisation that facilitates trading). The other key feature of futures contracts is their leverage effect.
The fact of having set up a trading system brings with it a number of advantages. First of all, by relying on a computer, you don't have to go through a trader who can compromise your investments with his or her emotions. The computer, in fact, simply lends itself to returning a series of data obtained from an input, in a logically correct manner. In this way it is not subject to stress and therefore can safely "err" without the terror of making incorrect investments.
Thanks to the trader's virtualization, it will be possible to carry out a careful management of the investments with the options, as every operation remains in memory and therefore can be used as a data for the following investments. A last important advantage is also to have a series of automatic rules, but still made on the basis of the characteristics of the trader, so as to better manage the operation of investments.
A final interesting consideration is the possibility of being able to sell or buy trading systems that over the years have shown a certain percentage of success in terms of earnings.
For those who do not know, there are some systems of this type that are offered free to other users. In practice, some successful traders can get even better results thanks to the popularity they get from this very practice of providing other traders with their own trading systems for free.
It is a bit of a vicious circle, which partly follows the basic model of operation of Google SERPs: if you start to succeed you start to climb the rankings, and you gain in authority, so the more authority you get, the more the system allows us to climb position and, once you get the top, you can enjoy the visibility obtained to continue to gain confidence from users and the system in general.
From the point of view of TS, therefore, giving your skills increases the prices of the securities purchased, and therefore improves the market related to those same securities of which I put into circulation for free the ease of investment with profit.
Very often links to the best automated trading systems in binary options free of charge are registered in industry forums and are therefore within reach of the smartest investors and attentive to market trends.
Then there are the hybrid systems of Social Trading in which the trading activity is based on the sharing of investment information between those who belong to a virtual community.
Let's close by talking about Arbitrage. It represents the activity of buying and reselling differentials between market estimates and between assets in various markets. We can have arbitrage in these situations:
Apps for online trading are many, and it is difficult to find the ideal solution without wasting time with non-functional applications. So, we try to make it clear by recommending a range of trader applications to download and test directly with your strategies.
We have seen how, in the field of technical analysis, it is also necessary to consider in depth the psychological aspect that in fact can influence the market even in a more than decisive way.
Before we talk about Strike price we need to take a small look at some concepts related to call and put options.