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. Binary call and put options trading spins extremely fast, be it hourly or daily. Lucky day traders find that their investments consistently land in the money, and they reap huge rewards as a result.

High returns attract investors to binary options trading

Yields on quick spin trades range from sixty percent to, in some cases, seventy-five percent. It is literally impossible to calculate compounding rates of return on some of these investments because the returns are so high. Here is an example of what a business payment might look like.

Suppose first that the trade is due in the money. What would be a two hundred dollar investment in the seventy five percent paying call options? The answer is a $200 trade on a contract pays $350 ($200 capital investment plus 75% of the $150 profit).

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

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 a call at the money (for example) with a put option at the money. This can create a nested position where the trader makes money if the spot price at expiry is between the two strike prices.