Popular Binary Options Strategies
The following are some of the more popular Binary Options Strategies:
- The Reversal Strategy
This is a popular choice with many traders. With time and experience, it is likely to become yours as well. The reversal binary option strategy is built around the predictable aspect of an unpredictable market. The financial market is in a constant flux. Assets rarely stay too high or too low for long. Your aim with this strategy would be to monitor the market in search of assets that appear to be dropping or rising abruptly and too quickly. Knowing that the assets are unlikely to maintain this momentum for too long, you could buy an option on the assets, essentially forecasting the expected reversal.
- Double Trade Strategy
Sometime referred to as the pairing strategy, you’re more likely to achieve success with the double trade binary options strategy if you have a keen understanding of the different market patterns. The idea is simple. With the double trade, traders maximize their investments by purchasing two different options on the same asset at different intervals. For instance, say you purchased $1000 on a put option for an asset and then you noticed that the trade was riding in your favor—but lower than your initial asset. You could purchase another put option on same asset, essentially increasing your profits with two different active trades.
- The Bungee Option Trading Strategy
The primary appeal of this strategy is the promise of a quick turnover. The Bungee option capitalizes on the quick expiry of investments allowing you to make tidy profits over short durations—typically ranging from 5 minutes to an hour. The end result is either black or white. There are no grey areas. With the bungee options trading, you can end up losing or winning all your investment depending on your prediction. Compared to other Binary Options strategy, the Bungee option trading strategy is fairly easy to understand thanks to its uncomplicated payout structure.
- The Straddle Strategy
The Straddle Strategy, also known as Fence Trading, is a popular but slightly complex strategy, capable of yielding double returns for the investor. With the straddle, a trader places both put and call options on the same asset—essentially forecasting multiple price levels on the same asset. For instance, instead of making one call, you may simultaneously predict that the price of an asset will fall from its high level and also forecast that it will rise from its low level. This way, you’re sure to win on at least one of your forecast. And if at the expiry, the price should fall somewhere in the middle (essentially ‘straddling’), you get to win on both sales.
- The Hedging Strategy
As suggested by the name, this binary option strategy is often used by traders who wish to protect a part of their profits. Instead of waiting till the expiry time and maximizing the potential return, you can choose to sell a part while letting the rest ride to the end. The payoff might be less but you’ll be protected from a disastrous loss if there is a sudden reversal.