5 Advanced Trading Strategies

By learning different binary options strategies, you can increase your profit potential over the long term. As your trading develops, you may want to consider using different binary option trading strategies that can help you maximize your rate of success. The following provides a glimpse into some of the strategies you can implement as you trade binary options on the platform:

1. Hedging Option Strategy (also known as Pairing)

This binary options strategy enables the trader to take advantage of a window of opportunity so you can try to maximize your profits with a lower level of risk. Take an example where you’ve placed a call option on HSBC stock with a strike price of 80.00. Let’s say this trade is successful with the price upon expiration being 81.00. You want to place another trade on HSBC stock but you are concerned that it is likely not going to continue to rise. You can implement a hedging strategy by pairing a put option on HSBC stock alongside a call option on the asset. This will allow you to hedge against both eventualities and safeguard your initial return.

2. Straddle Strategy

A similar strategy is the straddle strategy, where a trader would initially place a call and a put option on an asset. The difference here is that the trader needs to watch the movements of the asset very closely in order to ensure he knows when to place the call or put option on the asset.

For instance, let’s say a trader wants to place a binary put option on the NASDAQ market index that is trading at 15,111.00. The trader believes that the value of the index will fall in the next few hours. So, he would execute a put option on the NASDAQ and then as soon as it starts to show signs of declining further, would place a call option on the index. This way the trader can take advantage of the value fluctuations of a certain asset.

3. Risk Reversal Strategy

This is one of the binary options strategies where an understanding of an asset’s historical performance and sensitivity can prove useful. If an asset is tracking in a particular direction that isn’t typical for the asset, you can place a trade on the asset which highlights that it will likely change course. So, if you are trading on Eni stock where it is trading at a strike price of 82.00 and you believe this is unusually high, you can implement a risk reversal strategy here. If you were to use this strategy, you would execute a put option on Eni stock as you believe it will change direction in the near future.

4. Index-asset Divergence Strategy

For this index specific strategy, a trader would take his knowledge of a particular stock that is highly influential to the index into account. A user would first execute a trade on a company’s stock and then execute an opposite trade on an index the company is a component of.

If you were to place a binary call option on the Apple stock since you believe the stock will rise, you can use an index-asset divergence strategy to hedge this trade. Using this strategy, you would place a put option on the NASDAQ index, which Apple is a component of, helping you to minimize any losses if the value of Apple’s stock falls upon expiration.

5. Commodity Stock Affect Strategy

Similar to the index-asset divergent strategy, implementing a commodity stock affect trade involves blending your knowledge of one asset category to another. For individuals who enjoy trading on commodities, this can be an effective way to increase their overall profits.

The value of commodities, such as oil, has a major impact on the organizations that uses it, such as automobile firm BMW. So, bearing this in mind, you can base your predictions on the value of the commodity to determine a price movement in the value of a stock. Say the value of oil is continuously rising and is reaching heights never expected before. You can place a call option on the value of oil and you may want to also place a put option on the value of manufacturing firms that use oil as a significant part of their process. Since the value of oil is likely to rise, according to your prediction, this may also have a negative impact on the organization’s ability to maximize its profits.

By trying out some new advanced trading strategies, you can boost your income from binary options trading and learn more about your assets. Try one of these strategies today to start experiencing the results.

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