Binary Options Trading Hedging Methods In this article I am going to discuss and explain you some binary option hedging strategy examples methods that you can try with Binary Options contracts. First of all, I want to explain what is exactly hedging.
Hedging is a way to reduce the risk of your trades. This strategy is not easy because it’s difficult to find the righ setups. It’s a strategy about two contracts with different strike price to the same asset. This binary option chart is from GBPUSD currency pair. The general idea of this strategy is to create bounds for the same asset with two contracts. To create an ideal straddle you must find the higher level of a trading period and take a call and the lowest level of a trading period and take a put. That’s why this strategy is not easy, because is a difficult to predict the highest and the lowest level of a trading period.
Now let’s see the possible scenarios. The put contract expires after the reversal in the support and it’s in the money. Five minutes ago we took a put in the support which expires in the money,too. So, in the first scenario we have 2 ITM trades with a high reward.
In the second scenario our first put trade will be in the money but let’s assume that the support will not stop the price for our call like the next time that the price test the support in the chart. So, we have an ITM put and an OTM call. This means a very small loss for us. So, if a trader will create a good straddle the possible scenarios are a high reward or a very small loss. Some more binary options hedging strategies These strategies are mainly for binary options trading in an exchange and are about hedging the same or different assets. GBPUSD and USDCHF are two currency pairs which usually moving opposite to one another. This is from GBPUSD currency pair.
You can see that at 12:25 the GBPUSD is moving up and about 50 minutes is still moving up. 50 minutes is still moving down. So, there are opportunities to trade this. Spread Betting or Spot Forex with the same direction.
You will win one of them for sure. For being profitable with this you should find the right time in which these two currency pairs give you a profit. For example in this chart we can open two sell orders. Even in first 10 minutes we will have profit because the downtrend in USDCHF is stronger than the uptrend in the beginning. For doing this in Spot or in Spread Bets you must have a good margin in your account. These two pairs EURUSD and GBPUSD are moving in the same direction.
You can hedge them in a binary options exchange. For the example we will use 2 five minutes contacts in these 2 currency pairs. The contracts are opening for example at 10:00 and the expiry is at 10:05. We are buiyng a call contract for the one of them and a put contract for the other. You must be logged in to post a comment. JPY pair to open the “put” position in binary options. This action is based on the NFP data which will drop in a few minutes later, and is predicted to show worse-than-expected results.