Advanced Binary Options Trading Strategies

If you are an experienced binary options trader, you may be interested in learning about more advanced trading strategies. These strategies require a solid understanding of binary options but they also offer more effective means of generating a profit compared to simple strategies. There are a number of advanced binary options trading strategies you can use including hedging, straddle strategy, risk reversal and others.

advanced strategies for trader

Trading Binary with the straddle strategy

One advanced binary options strategy is called the straddle strategy. Using this strategy, a trader would execute a put or call option on a particular asset. Now, traders need to carefully watch the market to watch for any changes in price movement. For instance, if you execute a put option on a stock and then believe that stock will continue to decline you will put a call option on that same stock immediately to take advantage of price fluctuations. You’re straddling between the rising and falling prices!

What does hedging binary options mean?

Hedging is similar to the straddle trading strategy as you will pair a call option with a put option to ensure your initial return. For instance, let’s say that you have placed a call option on a commodity and that trade finished in the money. You want to place another trade but you are concerned that the price will not continue to increase. Therefore, you will execute a put option along with a call option on that asset to ensure that hedge against both possibilities. The difference between hedging and the straddle strategy is that the straddle strategy requires you to focus closely on the movements of the market so you can get in at just the right time.

Applying Risk Reversal on your contracts

The risk reversal strategy works best if you have an understanding of the historical sensitivity and performance of the asset you are interested in trading. If the price of an asset is moving in a direction that is not typical then you can place a trade based on when you believe the price movement will shift. For instance, if you believe the price of a stock is abnormally high then you can use the risk reversal strategy by placing a put option on that stock because you believe the price will soon change.

Binary Commodity Stock Affect

The commodity stock affect strategy is a great binary options trading strategy for those focused on commodities and it can help increase your profits. The values of commodities like oil have a significant impact on organizations that use the asset. Therefore, you will want to base your predictions on the commodity’s value to determine the price movement in a particular stock. If the value of oil is rising and reaching unprecedented heights then you can place a call option on the oil and a put option on manufacturing firms that rely on oil. The increased price of oil will likely have a negative impact on the manufacturing firms’ profits.

Trading with Index-Asset Divergence strategy

The index-asset divergence strategy is similar to the commodity stock affect strategy except it uses stocks to determine the value of indices. For example, if you place a call option on Apple because you believe it will increase then you can use index-asset divergence for hedging your trade. You will then execute a put option on NASDAQ which Apple is part of. This will help you minimize losses if the price of Apple’s stock drops. Essentially, when you use this strategy you will choose an option on a stock of a company and you will then execute the opposite option of the index that the company is part of with the goal of minimizing possible losses.

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*ITM – In The Money, **OTM – Out The Money