Straddle Binary Options Trading Strategy
The Straddle is a more complicated strategy, because it involves buying both a Call and Put option on the same asset. The investor straddles the asset at a low point as well as a high point, and therefore the area in between the two options can be twice as successful.
This is a particularly useful strategy to protect oneself in volatile markets. If the price at expiry is somewhere between the two levels, the trader finishes in-the-money on both and maximizes profit. In a worse case scenario, at least one prediction will be correct and the trader minimizes losses.
Although the setup itself can be difficult, the straddle is one of the best strategies in binary options trading. The trader is looking to place a Put as high as possible on the asset and then when the market drops, place a Call in the opposite direction as it returns back up.
This means the trader always has at least one trade expiring in the money and he will either take a minimal loss or gain a huge reward for landing both trades for a large sum. The Call and Put options do not have to be bought at the same time.
Rather an initial option can be bought with a longer expiry and the second purchased once the asset’s direction is more established.
Note that the straddle in binary option trading is different from vanilla options since the purchase price and exercise rights differ between the two.
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