Binary options trading allows for many strategies. Among the most simple ones are directional bets with Calls and Puts. In these situations, traders bet on either assets going up or down. However, there are other strategies to pursue. In this article, we discuss a straddle strategy.
Binary Options Straddle Strategy
When a trader enters into a straddle, it means that a bet on both directions is made. Thus, both a call and a put are bought. Straddles are often used during periods of greater volatility. With this strategy, a binary options trader hopes that at least one leg of the trade ends up in the money.
It is also possible that both legs produce a winning outcome. This is hard to do with options that need to expire above and below certain levels, and were entered for exactly the same expiration period. Then, only one leg will likely be a winning outcome. In that situation, a trader needs to ensure that the payout from one winning side (whether a put or call) compensates for the cost of both options (a call and a put). This, most of the time, is difficult to do.
However, if options are entered for different periods of time, then a two-side win is possible. For example, a 60-second call could be purchased together with a 5-minute put on the same asset. This particular strategy can produce positive results if the asset price first spikes up and then declines.
The likelihood of it happening can be determined by looking at charts and other indicators such as Bollinger Bands, Moving Averages, and Relative Strength Index (RSI) among others. For instance, the asset’s price may be approaching a peak (based on the previous price action), while RSI is weakening.
It is possible then that the price will stay at that level for a short while (especially if that happened before and the pattern is about to repeat), so a 60-second call may be acquired. At the same time, if technical indicators mentioned above indicate that the price is likely to start falling, a put for longer period of time (5 minutes or even longer) can be acquired. Since both a call and put are being bought, a straddle is created.
Another way to bet with straddles is by acquiring One Touch Options. Both calls and puts don’t need to expire at favorable price, but rather need to touch that price level during the options’ life. This way, both sides can be bought for the same period of time, and this strategy will work if that time period is long enough for the asset to move up and down enough to trigger the touch points on both sides.
Yet another way to go about straddle trading is by buying puts when the price seems to peak out and is likely to fall, and then, once it falls and reaches the bottom, to buy a call. This set-up actually is not a pure straddle since both calls and puts aren’t entered at the same time, but still resembles straddles in most respects and can, indeed, be profitable.
Services for Binary Options Traders
Quality binary options brokers such as Ultra Trade offer access to trading of multiple assets including stocks, indices, currencies, and various commodities. All these assets can be traded from a single account on a single platform. Various binary option kinds are available, so this way traders can pursue multiple strategies.
UltraTrade offers advanced charting and technical analysis tools as well as educational resources for its clients. What’s more, trading signals are provided in order to pinpoint trading opportunities for multiple assets that are accessible via its trading platform.
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