Binary options are among the most flexible of all trading instruments and savvy investors are guaranteed of making profits when they adopt good strategies. The flexibility is mainly because a binary options trader can exit a trade before the expiration date. This means if a binary options trader suspects the trade might close out-of-the-money, he/she does not have to ride the trade to the end.
There are different binary options strategies for leveraged trading – meaning you will always get the strategy you want. We all have different weaknesses and strengths and our circumstances are different, meaning we all need different binary options strategies for leveraged trading. Picking a textbook strategy just because it worked with another person will not work. You can pick a textbook strategy, but you have to customize it so that it incorporates your preferences, your strengths and weaknesses, and your specific circumstances.
One of the most common binary options strategies for leveraged trading is a long call. This strategy is used by traders in decisive bullish markets. This is a simple strategy, but very important for every binary options trader. With this strategy, the binary options trader buys a binary options contract that is leveraging an underlying asset that he/she suspects will go up before the expiration date. When the binary options trader buys a call option, he/she gets the right, but not the obligation, to buy the underlying asset at the pre-determined price any time before the expiration date. Going ‘long’ means the binary options trader is holding on to the contract in anticipation that the value of the underlying asset will rise high enough for a profit. With this strategy, there is need for a lot of research – pick an underlying asset only after doing fundamental and technical analysis.
Another of the common binary options strategies for leveraged trading is a long put. This strategy is used by traders in bearish markets. With this strategy, the binary options trader has the right, but not an obligation, to sell the underlying asset at the pre-determined price any time before the expiration date. A binary options trader goes ‘long’ with this strategy while anticipating that the value of the underlying asset will go down so that he/she can make a profit. Again, there is need for fundamental analysis and technical analysis so that the trader can pick an underlying asset that is likely to lose value before the expiration date.
A covered call is another binary options strategy for leveraged trading. This strategy also goes by the name ‘buy-write’ strategy. With this strategy, the binary options trader is able to hedge his/her funds against risks. This strategy is used when a binary options trader is not certain about the underlying asset’s likelihood of rising before the expiration date. With this strategy, the trader has a short term option and a long term option.
Finally, another of the binary options strategies for leveraged trading is a married put. Here, a binary options trader holds a ‘long’ position while buying put options on the same underlying asset. This is an important strategy in highly fluctuating markets.
