Binary Options Straddle Strategy


Trading with application of straddle strategy is considered to be highly efficient. The process of straddling includes opening the trades by covering two sides simultaneously. In order to do that, a trader must buy “call” and “put” options at the same time. Due to this characteristic, one often can not tell the difference between straddling and hedging since the latter employs CALL&PUT purchasing as well. So, how to differentiate between two strategies? The main distinguishing factor is that, in straddling, the extreme points of a trend are traded upon. In contrast to it, hedging allows placing the trades that are close to each other.

With the help of the provided image, you can get the good notion of a successful 60 second binary strategy application. According to the chart, an unsustainable level is reached by the up trending line. It is also proved by the analysis of the RSI, which is provided below the chart.

Thus, if it shows more than 70, this is a sign of the traded asset (GBR/USD currency) being in the overbought area, ready for reversing. A “put” trade with a 20-minute expiry is placed on the top of the trend. According to RSI, shortly after the opening, it starts going down. The reaction of the market to this move is more aggressive than it was predicted. Specifically, there is a sudden downfall of the currency – the asset goes down 15 minutes prior to expiry. Accordingly, much time is left until the trade closure, which may mean that the price can make a rapid move up. In this case, a trader loses his investment since the jump, which is made before “put” option expiration, entails a failing result. Shortly before 2 p.m., there is an index fall to the level below 30. It signifies that the asset reaches an oversold area and may be expected to take a reversing move.

At the moment of the currency lowering, the trader buys a “call” option, after which it gets up rapidly. As a result, the expiration of the trade falls into the period between “put” and “call” functioning, which implies winning profits on both sides.

As the example reveals, trading on the straddle technique may enhance ones profitability, especially, when volatile markets are involved. Moreover, it helps to “save” the failing trades, which seem to be ending in the “out of money” position. From the other side, the application of straddling does not make sense in low volatile markets, which considerably lowers its value. Finally, even in the situations, which are similar to our example, one still runs a risk of losing on both sides.

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