Binary Options trading scheme: Strangle and Straddle

Ted Capwell

Quite a lot of years have passed since the appearance of the forex market and trading on it. More and more people began to find themselves in trade. Now a lot of traders from the Forex market have become interested in binary options. First of all, this is necessary to expand their potential in Forex trading. On the other hand, many who did not intend to trade on binary options, nevertheless remained in this niche. The most popular binary options are in spot forex traders. If we talk about spot forex, then it differs from trading in binary options. Why should I read about this? In the course of trading in different markets, you can come to a lot of passing good ideas that will be able to you in generating good profits. Knowledge is never superfluous.

If we have touched the topic of trading on spot forex, then the main interest in this kind of trade will be the price movement for a particular currency pair. In case of a price increase, we will need to take a long position, in case of a fall – a short one. In binary options, everything will be a bit more complicated. Since the types of options themselves are much larger, accordingly, how to manage their options will be greater.

Binary option trading schemes that works

In the process of trading binary options, you can predict where the price will go at the end of the day. To make trading transactions for spot forex this may not be enough. Here the key factor will be the closing moments of the transaction itself – above or below the strike price. This is also a matter of profit. Also one of the factors here is the range in which the asset will be traded.

Binary options can be your assistant in this market. Since you will have the opportunity to use boundary options and options without touching, for trading on a non-animated market. In the market of binary options, you may not get the same level of profit as from spot Forex. But binary options can fill this missing gap well. In fact, you will have the opportunity to use binary options trading as a reliable way to hedge deals. Another advantage will be the ability to use this type of transaction separately or together with spot-for-trade.

This is the essence of our strangle and strand hedging strategies. Next we will talk about each of them separately.

Strategy of trading of binary options “Strangle”

Long Strangle

In this case, the application of the strategy, we must grasp the moment in which we will be confident in the strong price movement. However, there remains the question of the direction of this movement. How can we determine it. That’s the time to use the trading strategy of the binary options “Strangle”.

When it is best to apply. We will need to monitor the release of the main news, which will concern the statement of the major central banks about their monetary and credit policy.

Next, we apply the strangle strategy in the long term. We buy two options, which will have the same expiration time and different price directions. Strike prices they too must be different. In the future, they will depend on the forecasts made by you earlier. The forecast will be made about the strength of the price movement and its direction. In binary options, this strategy is very close to buying a boundary option. This is when the transaction will be successful if the option price leaves the limits of one or two limits of the range specified at the time of the expiration of the transaction itself.

Short Strangle

The trading strategy of binary options “Strangle” is used in the event that the price under your forecasts will be within the range chosen by you. This strategy is used in case of minor movement of underlying assets. This strategy is also often used when the market has a quiet time, a gap after the closure of the North American session and the opening of the Asian or the latter. This strategy also works with traditional options like the Long-term strangle strategy. The difference is the sale of Call and Put options with the same expiration period but different strike prices. The application of the strategy in binary option trading does not go without the use of a boundary option. In this case, we will focus on the internal boundary. The price must move within it, so that the transaction remains winning.

The trading strategy for the binary options “Straddle”

Strategy strangles and straddles among themselves are quite similar. But these strategies have one distinguishable difference. Straddle, as a binary options trading strategy, uses Call and Put options with the same strike prices. The expiration periods in these options are also the same.

If the Straddle is a long-term one, then the options used by the trader must have long expiration periods. In this case, the profitability of one of the options will exceed payments for both. If we talk about binary options, then we will mainly use options that have a long expiration period. Such a period will be from one day or more.

A short-term straddle is not recommended for traditional options. You may not have enough space for price movement and their tracking. For binary options, this can be one of the most profitable strategies. But a trader always needs to remember about the risks.

What we have

In which case we use the data of the binary options trading strategy. On the example of currency pairs, we are looking for those who have strong resistance above their current price level. And, accordingly, below this level there should be no less strong support. In this case, our currency pair will move within its typical daily range. But, this pair will also be held between our two levels – support and resistance. In this case, a short strangle, whose boundaries stand for support and resistance levels, will give us a positive effect on the application of this strategy.

If you have chosen the way to monitor important news, than the resistance and support levels will still have to be looked for. The limits of the range in this method are usually put below the resistance level and above the support level.

When using these strategies, you always need to remember that trading binary options is a business that does not like excitement. You must give a good account of all your actions. Do not allow yourself to act on emotions. I wish many profitable trades to all.