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Things you must know being a binary options trader

Date Added: March 18, 2012 12:17:32 PM
Author: admin
Category: Business: Stock Market

 

First of all being a binary options trader you must understand the asset that is underlying the option that you are purchasing. You should know where it will trade and any other factor that might influence it. If you are dealing with a stock; see whether the company owning it would make any announcements regarding it or not. Similarly, if it is an index you are dealing with then consider the political factors that might take an affect over the company or its country’s currency at some point. One thing that every binary options trader must realize is that in order to take back a higher rate of return from a binary option; a higher risk is to be taken. Before taking your position on any option you must ratio the risk involved against the profit or reward behind that option.
 
 
Binary options traders must know about the Reversal strategy. This is applied when a trader just waits on the market to make a move suddenly in a certain direction; while doing this it is to be assumed that the market value will not be stuck at an extreme permanently. The investor will then purchase the option at an extreme value; there is a hope for that asset coming back or reversing back to its original position; this is when the investor can make a profit once the asset changes direction.
 
 
Another common yet effective technique that successful traders apply is closely monitoring commodities; these commodities will then have a knock on effect among and from each other. For instance, when there is a change in the stocks, the index gets affected in which the stocks are traded. Similarly, if there is a big change in a commodity’s price, this will surely affect its country’s currency as well. It is very useful that you monitor the changes in a single underlying asset and then purchase an option over secondary asset that will get affected.
The Straddle is yet another pretty common technique used by binary options traders. This is when a call option is purchased especially when the price of an asset is low. As the price of that asset begins to increase, you can purchase a put option as well. Now suppose the expiry level gets settled in the middle of both strike prices; the investor’s both options are in the money now. Close monitoring is required in this binary options trading technique.
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