Thursday, June 7, 2012

Binary Options Strategy

Binary options trading is a high turnover trade with very high returns if you are on a winning streak. An investor can either be in the money or out of the money. For some, it can be like a lottery, with no way of predicting how many times you will be in the money. Before buying any option, it is important to have a binary options strategy that will guide your investment goals. Having a good strategy nit only ensures you make profits most of the times but also ensures you can cut your losses when you are on a losing streak.
Binary options strategy allows for the prediction of outcome.  When you are planning to trade hourly expiring options for example, having the best binary options strategy is important in achieving success in a more consistent manner. It is like your investment formula. Every top investor has a winning strategy that they develop over time in the market.

 There are people who trade in futures and they are in the money most of the time; there are others who are out of the money most of the time in spite of the fact they have a good understanding of the futures market. The difference comes due to the difference in strategies adopted by each investor.
There are various kinds of binary options strategy that an investor can adopt in order to improve their odds of being in the money most of the times: covering call or put options strategies, purchasing puts and calls strategies, doubling options, bullish strategy, range volatility trending and money management.

Covered Call Options
Covered call options is a very popular binary options strategy that is employed by investors simply to cover their back when they are uncertain of the short term prospects of the options. In covered call options, the investors buys a long term hold option for the underlying security while also placing a short term call option for the same security just in case the underlying assets moves upwards thus enabling them to generate profits. In investment jargon, this option is normally referred to as “buy-write” option.

Range volatility trending
This binary options strategy is used were the prices of the underlying security are changing too fast and unpredictably. Range and volatility strategies are employed by investors who have already developed some experience in options trading although new investors can also take advantage of them. They are advanced forms of options strategies that determine how a stock will move based on oscillations in the pricing of an underlying stock. Range option is used in instances where an asset class does not show any signs of moving in any definite direction but “oscillates” around a range. Investors can buy “IN” the range and make money when the price of the underlying security is OUT of the range.  Range trading is popular strategy employed by investors to make money in options trading.

Put Option
Put option is binary options strategy that employs hedging to protect the investor from huge losses in the market. Most investors will purchase put options when there is a strong indication that the prices will fall. By purchasing the put option, an investor will be assured of a predetermined payout the when the prices of the underlying security do not touch the strike prices after a specified time frame.

Bullish strategy
This mode of binary options strategy involves an investor doing analysis of the market using the various analysis tools including fundamental analysis and technical analysis strategies to determine if the market is on upward trend.  After performing the analysis, the investor exercises their call option on the prediction that they have made using some of the analysis tools and buys the options contract that will give the maximum returns in the coming hours.

Money management
A critical part of your binary options strategy when trading is knowing how your money is moving. In  the money management strategy. Binary options trading can sometimes involve considerable loss of money die to the all or nothing nature of the game. In order to keep trading, you need to keep a tab on how much funds you have at all time and one strategy that investors in options utilize is that of money management. An important money management technique that is often employed as a binary options strategy involves limiting the value per trade to a certain percentage of thee remaining capital. Most traders will recommend the percentage for you but it can vary from 7-9% of your remaining capital. Money management allows you to cut down your losses and remain in the game for a log while the market picks up. It also advisable for traders having an unlucky run to remove some money from their trading account when they are having an unlucky run in order to eliminate the temptation to revert to big trades.

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