Binary Options Trades 22 ITM (in an exchange ) Part II

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Binary Options Trades 2/2 ITM (in an exchange )

in this article I am going to share with you my trades and my trading setups.I took some trades in an exchange broker. I told you how exchanges are in previous articles.Actually, I took 2 binary options trades.Both of them were in the money. I took also one more trade but not in binary options. For the same asset, the same time and almost the same time expiry I took a forex mini contract.Look at my results.

As you can see the first and the second trades are binary options contracts and the last one is the spot FX mini contract. The total profit is 53 pounds.This means about 83$ in about five minutes trading time.The opening price in the screenshot is the price I bought the contract.As I said in previous articles if the contract finish in the money the closing price is 100. If the contract finish out the money the closing price is 0. You can calculate the profit :

(Closing Price – Opening Price) x (number of contracts)

The opening and the closing price of the asset depend on the probabilities of the asset to be in the money or out the money.At the beginning of the contract you can buy or sell the asset to fall or to rise in a specific expiry time with 50$ because the probabilities are 50-50 for the asset to fall or to rise.Moreover, you have the choice to close your position before the expiry with a loss or a profit.Again, the price depends on the probabilities of the asset to be ITM or OTM.For example if an asset has its expiry at 12:00 and the time now is 11:57 (three minutes left for the expiry) and the price now is about 4 pips above the strike price you can buy the contract now for the rising of the asset but you must pay more than 50$ now, you must pay an amount about 75$ now because it’s very possible the asset to be in the money because now it’s about 4 pips above the strike price as I said earlier.Your profit will be smaller of course.If you buy the contract 75$ your profit will be 25$.

(100-75) X 1 = 25$

The binary options exchanges give many opportunities for trading binary options and a traders has also many opportunities to follow many strategies like hedging.

A Guide to Trading Binary Options in the U.S.

Binary options are financial options that come with one of two payoff options: a fixed amount or nothing at all. That’s why they’re called binary options—because there is no other settlement possible. The premise behind a binary option is a simple yes or no proposition: Will an underlying asset be above a certain price at a certain time?

Traders place trades based on whether they believe the answer is yes or no, making it one of the simplest financial assets to trade. This simplicity has resulted in broad appeal among traders and newcomers to the financial markets. As simple as it may seem, traders should fully understand how binary options work, what markets and time frames they can trade with binary options, advantages, and disadvantages of these products, and which companies are legally authorized to provide binary options to U.S. residents.

Binary options traded outside the U.S. are typically structured differently than binaries available on U.S. exchanges. When considering speculating or hedging, binary options are an alternative—but only if the trader fully understands the two potential outcomes of these exotic options.

Now that you know some of the basics, read on to find out more about binary options, how they operate, and how you can trade them in the United States.

U.S. Binary Options Explained

Binary options provide a way to trade markets with capped risk and capped profit potential, based on a yes or no proposition.

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Let’s take the following question as an example: Will the price of gold be above $1,250 at 1:30 p.m. today?

If you believe it will be, you buy the binary option. If you think gold will be below $1,250 at 1:30 p.m., then you sell this binary option. The price of a binary option is always between $0 and $100, and just like other financial markets, there is a bid and ask price.

The above binary may be trading at $42.50 (bid) and $44.50 (offer) at 1 p.m. If you buy the binary option right then, you will pay $44.50. If you decide to sell right then, you’ll sell at $42.50.

Let’s assume you decide to buy at $44.50. If at 1:30 p.m. the price of gold is above $1,250, your option expires and it becomes worth $100. You make a profit of $100—$44.50 = $55.50 (minus fees). This is called being in the money. But if the price of gold is below $1,250 at 1:30 p.m., the option expires at $0. Therefore you lose the $44.50 invested. This called out of the money.

The bid and offer fluctuate until the option expires. You can close your position at any time before expiry to lock in a profit or a reduce a loss, compared to letting it expire out of the money.

A Zero-Sum Game

Eventually, every option settles at $100 or $0—$100 if the binary option proposition is true and $0 if it turns out to be false. Thus, each binary option has a total value potential of $100, and it is a zero-sum game—what you make, someone else loses, and what you lose, someone else makes.

Each trader must put up the capital for their side of the trade. In the examples above, you purchased an option at $44.50, and someone sold you that option. Your maximum risk is $44.50 if the option settles at $0, and so the trade costs you $44.50. The person who sold to you has a maximum risk of $55.50 if the option settles at $100—$100 – $44.50 = $55.50.

A trader may purchase multiple contracts if desired. Here’s another example:

  • NASDAQ US Tech 100 index > $3,784 (11 a.m.).

The current bid and offer are $74.00 and $80.00, respectively. If you think the index will be above $3,784 at 11 a.m., you buy the binary option at $80, or place a bid at a lower price and hope someone sells to you at that price. If you think the index will be below $3,784 at that time, you sell at $74.00, or place an offer above that price and hope someone buys it from you.

You decide to sell at $74.00, believing the index is going to fall below $3,784 (called the strike price) by 11 a.m. And if you really like the trade, you can sell (or buy) multiple contracts.

Figure 1 shows a trade to sell five contracts (size) at $74.00. The Nadex platform automatically calculates your maximum loss and gain when you create an order, called a ticket.

Nadex Trade Ticket with Max Profit and Max Loss (Figure 1)

Trading A Reversal In Binary Options – Part II

Good Day Traders,

Kostasze is here. In my previous article I talked about some spots in my trading style and about the value of Price Action. In this article I will explain more specific with more screenshots how to trade easy and fast a reversal in Binary Options industry.

First of all, take a look in my last trades in 28/3

I took three positions whice were all puts, all ITM. The screen time was only about 15 minutes. This is an advantage of 60 seconds trading. More trading opportunities, more volatility, as I said. Every day, before I start trading I take a quick look in the market. I look always the behavior of the price near Daily Pivots, near High and Low of the previous day and the most recent supports and resistances. You can easily spot these levels with a daily Pivot indicator(daily pivots) and a Daily Fibonacci indicator(daily fibos). The high of the previous day is level 100 in Daily Fibos Indy and the low is level 0. This indicator is a really time saver. Especially in levels 100 and 0 there is the most of the time a reversal.

From the EMA’s and the price, you can see that we are in a big down trend.Look at the box, the price touch the orange line which is level 0 (previous day Low). Our RSI is oversold and the price make a small reversal. After that the down trend will continue but the reserval was made, even in this very strong down trend.

Today trade, EURGBP

Notice the blue horizontal line. In the beginning of the screenhot you can see that the price makes a pull back in this line,this is a support. Some minutes later, the price is moving below this line and then makes a come back. When price hit again this line you can see that the next bar is negative and now the price is moving down.The blue line acts now as a resistance. This is “change of polarity strategy”, when price breaks a support this support can become a resistance in the near future. I took my trade in the blue box. Price hit again the blue line and our 8 period RSI is overbought(price hit level 70). ITM.

Today Trade, EURUSD

Exactly the same setup. I took the trade in the blue box, when price hit the previous resistance and RSI was overbought. ITM.

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