Increasing the profitability of binary options transactions
В 83 issue of ForTrader.org magazine you and I have looked at the example of hedging transactions with binary options "One-touch", protecting profits from possible losses. However, not all brokers of binary options offer their clients this type of transaction. Therefore, this time we will consider the option of saving and increasing profits from the order with a simple binary option.
Other articles about binary options
- Risk hedging strategy on Forex binary options
- Binary options on or trading currency pairs?
- How to correctly determine the expiration date of a binary option
- 5 mistakes of beginners in binary options trading
- Types of binary options
Recall the situation we had last time
So, we had a buy trade at 1.35914 on EURUSD with 1 lot. As we can see on the picture, the price is moving in a favorable direction for us and everything is going to TakeProfit. However, unlike the last example, when you were sure that you would get all your planned profit within 24 hours, now you have there is a fear that a U-turn is about to happen. What to do in this case?
The standard trader's technique at which point the StopLoss will be set to Breakeven or slightly higher, having fixed a part of profit, and wait for further developments. In this case, assuming that at the moment the price is 1.36214, you have 30 pips or 300$ of profit, which means that you can definitely keep half of it. As a result, you move the StopLoss to 1.36064, and then, instead of just waiting, you open a put trade of 150$ (which you were already prepared to lose by setting a breakeven) on a binary option from the current level on EURUSD with an expiration date of one day.
Next, your scenario can unfold in three ways:
If the price continues to move up, then you will get a profit, fixed by TakeProfit or manually, minus the 150$ spent on binary option.
If the price starts to move down, and closes your trade at StopLoss, then you will get 150$ of fixed profit, plus profit from the binary option.
If the price will move in the corridor between the breakeven level and the opening price of the option, then you will make a profit on the manually closed trade, plus 150$ of fixed profit, plus a small profit on the option.
In all three cases, you are in profit more than 150$, except in the case that the price in a day will be equal to the opening price of the binary. It's not hard to see that this is much more interesting than just waiting for a trade to close at breakeven, which means that using a binary option to increase profits is just as interesting as hedging position.
Perhaps you know other options for profitable trading in conjunction with binary options. We will be happy to cover them in future issues of the magazine. Write to us!