How to Trade Binary Options and Protect your Position

Strategy for Binary Option offers traders a chance to earn large profits through trading. Even though here the stakes are high, but this type of trading has an advantage over many other ways of trading. The trend outcome can be predicted in a short time period. When trading the stock market normally, it takes more time, even weeks or months before you get a result. When you start using strategies for Binary Options for trading, the end date may just take an hour or more.

There are several advantages of using strategy for Binary Option. To begin with you get many options to buy, sell and trade stocks. When you are assessing risks in the market, you can safeguard your cash and invest by choosing the most suitable strategy of Binary Options and hope to get favorable results.

Most of us are aware that Binary Options involves trading by predicting the result. It is like a toss the coin concept where the coin is tossed to predict the outcome of tails or heads. If you have predicted heads and it turns out to be right and you win. It will be a different thing if the outcome is tails as you lose all. This can also be applied in the strategies of Binary Options. Like the toss-coin game, you make a forecast if the asset, commodity or stock price will rise of fall and you earn a percentage of the investment made when the odds result in your favor.

It is true that there will be occasions when the odds will be in your favor and others when you are unlucky. It is vital to safeguard your investment and try to have minimal loss or not at all. This can be done by leveraging one or all kinds of Binary Options Strategy handles by numerous traders. Before trying out any of them you need to understand and have better knowledge so that your trading turnover is always positive. Once you follow strategies of Binary Options, you are assured of best results.

Mentioned here are different kinds of Strategy of Binary Options:

Strategy 1: Protective Put

This kind of Binary Options strategy has several other names such as “married put,” “put hedge”, “put and stock”, “Protective Put” or “bullets,” strategy. Here the trader gets complete hedging coverage for the stocks. He purchases a put to safeguard investments in case of a drop in stock price. This is also a good option for a trader who is unsure of the stocks in which he has already earned so he buys a put to ensure that the position of his stock position stays intact even during the possibility of a drop in the price of the stock in future.

To give an example if an options trader has 100 shares of an asset trading at the price of  $60 in August, in order to guard his investment, he decides to employ a protective put strategy by purchasing a SEP 50 put option for $300 to keep his current stock possession, except if he has sold the share. So even if the price of the stock falls, the trader will get back his initial investment in spite of serious losses.

Strategy 2: Covered Call Option  

This is a good strategy especially for investors who are looking to lengthen their position in their stock. For example, a trader with a company share can use this approach to get additional cash from the stocks that he presently owns. It is also known as the “buy-write” strategy and is often used by veteran traders who are looking to be open even if when they already have a share or stock ownership.

It is best for traders who are trying this strategy for Binary Options to take advice of a brokerage or a financial firm to get likely success.

Strategy 3: Money Management  

It is possible for traders to make mistakes sometimes when they trade for commodities or stocks. At that time Money Management is one strategy of Binary Options which lets traders monitor and follow the flow of their cash and where it is moving.

Money Management is a helpful and efficient strategy as it offers details on if you enough cash to trade for the coming days, months or weeks. It is also a precautionary strategy which helps you to evaluate some risks and use other techniques to manage your cash without losing too much. Money Management strategy also gives surety that he can make profits with trading with money management strategy.

Strategy 4: Collar Option

This strategy has been developed to aid traders to manage stocks without suffering large losses. It is possible that the trader does not earn too much, but will surely not have to get concerned about serious losses. An advantage of collar options strategy is that it is almost free to set a collar option. The cost of selling a call is used to buy a put. When the trader makes use of the collar strategy he can get lower or higher returns based on the outcome.

Main point is that you will not have to put your investment in danger if you use any of the strategies of Binary Options for protection. If you have a long experience and good knowledge on the market where you trade, your forecast will be good and you will not have to get concerned about future losses.