Every trader needs to pick one of binary options trading strategies out there. Whether you opt for a short- or long-term strategy, you should be aware of the basics and build up your trades on it. Binary options trading strategies are dynamic, but not that hard to master. In order to minimize your risk, here are some ways to trade. Enjoy!
The Basics of Binary Options Trading Strategies
The Straddle and The Strangle are a part of the volatility binary options trading strategies, meaning we are just betting on volatility and we don’t care about the direction of price as long as it moves strongly in one direction.
We already talked about the Long Straddle, usually known simply as Straddle. In this strategy, we buy at-the-money calls and puts. Both directions of price are covered by buying a call (to bring profit if price moves up) and a put (to bring us profit if price moves down). The Long Straddle needs volatility to bring you money, but there is another strategy that allows you to make money if price stays stagnant. It is called Short Straddle.
This means that instead of buying options, we sell them. In the moment you sell call and put options, you receive the premium for them. The premium for either buying or selling calls and puts is always shown in your platform by the broker.
If you sell (or ”write”) an option, you receive the premium for it immediately, but if price starts moving strongly on the upside or on the downside, you start losing. The more price moves away from your call or put, the more you lose. So it can be riskier than a long straddle binary options strategies, because your loss can be unlimited in the case of the short straddle, while the profit is limited to the premiums you are paid when you sell the call and the put.
However, there are advantages in using the short straddle binary options trading strategies in trading because there are times when price just stays flat. This happens mostly during the Asian session. Price is known to move in a tight range during that time. If traders want to exploit the advantages of market volatility, then it is advisable to trade in London and US trading sessions.
If you want to get more informed, we found this great guide that covers all these binary options strategies in more detail.