Binary Options Trading: Scenario For A Successful Binary Options Strategy

Binary options trading varies from broker to broker, but the basic concept is the same: each trade has only one of two possible outcomes. Call and put binary options trading spins extremely fast, be it hourly or daily. Lucky day traders find that their investments consistently land in the money and reap huge rewards as a result.

High returns attract investors to binary options trading

Returns on quick turn trades range from 60 percent to, in some cases, 75 percent. It is literally impossible to calculate the compound rates of return for some of these investments because the returns are so high. Here’s an example of what a business payment might look like.

Let’s first assume that the trade expires in the money. What would a two hundred dollar investment in the seventy-five percent yielding call option payout be like? The answer is a $200 trade in a contract pays $350 ($200 equity investment plus 75% of the $150 profit).

However, what if the position expired out of the money? This is where the runners can vary significantly. Sometimes an investor can unload a call or put option out of the money before expiration, but some brokers operate differently. A failed trade could pay out $30 (15% of the original $200 investment at expiration) on some particular stock. In other cases, a trader may not be able to change his position at all. The bottom line is that it is difficult to exit a trade out of the money.

A binary options strategy

One possible way to reduce the chance of getting busted while using all or nothing binary options trading contracts is to pair an at-the-money call (for example) with an at-the-money put option. This can create a nested position where the trader makes money if the spot price at expiration is between the two strike prices.