Investing your money to trade, even in the Binary Options market requires strategies. The best traders usually adopt different strategies. They combine them in order to make the most out of their investment, without having to lose consequent amount of money.
One of the most popular strategies used by both new and experienced traders is the Straddle Strategy.
In the Binary Options market, this strategy is used when the trader is expecting the price of an underlying asset to fluctuate but is unsure of the direction of the movement. Buying call and put options enables the trader to profit from both of the outcomes and in cases where the price variation is significant enough, the amount of money won with one option will cover the cost of buying the other one and will still leave some extra profit on the side.
However, the call and put options cannot be bought at the same time. None of the brokers out there allows this. The two conflicting options are placed at the respective top and bottom of the trend being monitored. So, basically, the first option is bought and then later, the other one is also purchased by the trader. Both of them have to be set to expire at the same time.
For instance, imagine a company that presents its yearly report on a meeting today. There are, of course, some expectations to this report. If they are met, the price of the company’s stocks will rise. If not, the price of the stocks will undoubtedly fall.
This is the perfect foundation for a Straddle strategy investment: a movement of the price is almost certain, but the direction of the movement is vague. By investing in both put and call options at the same price, the trader covers both outcomes thus providing a chance for a profitable result on his end. The trader can start by buying the option that seems more likely to him first, then follow the live charts and if needed, buy the contrasting one to ensure a financial gain.
So, can any trader simply buy both options on any asset and be guaranteed a profit by using the Binary Options Straddle Strategy?
The simple answer is no.
No one can be 100% sure that the price of the underlying asset is going to fluctuate. Even though in more cases than not the Straddle strategy ends in profit (sometimes even double profit!) the trader still faces the risk of double loss.
And as with all the other things, well, practice makes it perfect!
Before putting the real-life money on the line, a demo account to practice on is ideal, especially for the beginners. Finding potential assets and trying to predict whether it is straddle-worthy is a great practice! Spending some time perfecting this method can be of much help in the long run.
Another thing to always remember, no matter what strategy you use, is that thorough market analysis is a must. A detailed technical and fundamental analysis lay the groundwork for profitable trades.
Keep all these things in mind and go out there! Explore the great world of Binary Options trading, risk a bit, use all your best moves and eventually, make some cash!
DISCLAIMER: Futures, stocks and options trading involves substantial risk of loss and is not suitable for every investor. The valuation of futures, stocks and options may fluctuate, and, as a result, clients may lose more than their original investment. The impact of seasonal and geopolitical events is already factored into market prices. The highly leveraged nature of futures trading means that small market movements will have a great impact on your trading account and this can work against you, leading to large losses or can work for you, leading to large gains.
If the market moves against you, you may sustain a total loss greater than the amount you deposited into your account. You are responsible for all the risks and financial resources you use and for the chosen trading system. You should not engage in trading unless you fully understand the nature of the transactions you are entering into and the extent of your exposure to loss. If you do not fully understand these risks you must seek independent advice from your financial advisor.