Combining different types and expirations in Binary options strategies

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The search for a trading system with a high level of positive transactions is a hopeless occupation, aptly called “the search for the grail ” – a mythical artifact that gives the finder of eternal life. Newcomers to trading, like the crusaders in the Middle Ages, believe in the existence of such strategies and spend a lot of time and money searching for them.

Combining different types and expirations in Binary options strategies

An alternative way to fruitless research of trading supersystems is an approach that correctly combines the features of market movements and the conditions for calculating premiums for various types of binary options, which is what we are going to do today.

 

Combining different types and expirations in Binary options strategies

The main differences between binary options and trading currency pairs and other instruments offered by Forex brokers are guaranteed profit and loss rates , risk control, and expiration- limited time in a position. Therefore, the task of maximizing income when trading binary options comes down to finding strategiesthat give a large percentage of transactions closed with a profit. Studies show that trading within the day , the trader can count on a 60% predominance of positive outcomes. This leads to a rather modest final result, and if the premium is chosen incorrectly (less than 85%), it is fraught with a complete loss of the deposit.

Knowledge of the features of the types of binary options and brokers is the key to profitable trading

Combining different types and expirations in Binary options strategies

The most obvious way to increase income from binary options trading is to choose the broker with the highest premium payouts.

Not obvious to many traders, therefore, an often overlooked way to increase profits when trading binary options, is to study different types of contracts and the ability to use their features. Beginners prefer not to delve into incomprehensible conditions, limiting themselves to contracts “Higher / Lower”.

Regardless of the type of binary option, the trader who buys the contract, upon the expiration of the selected expiration time, receives a pre-agreed amount of the premium from the investment (subject to certain conditions). In all cases, the accrual of the premium determines the position of the price relative to the price point for the instrument at the time of the purchase of the asset.

The most common type of options are High / Low contracts. When buying an option, the price level is fixed and the trader makes a profit if the direction of the quotes movement is correctly determined . The same applies to binary options associated with a level or range, for which a premium is charged depending on their type, when the price is inside or outside the interval selected by the trader or broker.

If at the moment of expiration of the contract, at the moment of expiration, the price is outside the selected conditions, the broker takes the invested funds into the binary option, sometimes insignificantly compensating for part of the losses.

Thus, we can say that any binary option has two areas or zones of profit and loss, the size and location of which is always known before the moment of purchase. If the trader manages to cover the losing part with another option, which guarantees a premium exceeding the loss on the first contract, he gets a win-win position.

In this case, the strategy for working with binary options is not reduced to searching and forecasting price movements, but to a precombined position on several binary options that maximally covers the loss zone.

Basic rules for combining binary options

Combining different types and expirations in Binary options strategies

The use of combined strategies does not free the trader from the need to predict the direction of the market movement and obtain basic knowledge about volatility, intervals of trading sessions’ activity , features inherent in the selected instruments, the basics of technical and fundamental analysis .

In order to successfully cover the loss zones as much as possible, leaving the possibility of making a profit when the price moves, it is necessary:

  • Study the existing types of options (except for exotic or express contracts );
  • Select brokers with 100% premium payment;
  • Select the types of options associated with a range that you can set yourself, while the premium for such contracts should vary above 100%;
  • The expiration time of binary options should vary from an hour to a day.

Combined strategy “Antipode” for binary options “High / Low”

Combining different types and expirations in Binary options strategies

The “Antipode” trading strategy collects a combination of two types of binary options, when the quotes of the selected instrument pass a certain number of points into the unprofitable zone. If this does not happen and the price moves in the direction chosen by the trader, no other contracts are added to the already opened “Higher / Lower” binary option, therefore, it closes in a profitable zone.

Types of binary options involved in the combination:

  • “Above / Below” (Call / Put) with a premium of 100%, if it is lower, there must be compensation, for example, 85% in case of a successful outcome and a return of 14% of the loss;
  • Within a range with customizable bounds;
  • Configurable expiration time from an hour to a day (and above);
  • The investment amounts in both options are equal;
  • Traded instruments – any currency pairs.

Tactics of work on the “Antipode” strategy:

  • Determine the average oscillation range for the selected expiration range

For example, if a trader works on the EURUSD currency pair and has chosen options with a duration of 1 time per day, then the range of a daily candle can be determined by the volatility parameter , it will be about 100 points . When choosing an hourly expiration period, you should focus on 25 pp.

The range of fluctuations can be determined by the ATR indicator (average true range), choosing in the settings as long as possible a period from 100 to 200 pips, or using various services for historical determination of volatility .

  • Wait for the rate to fall or rise by 50% of the selected range and select the “Higher / Lower” option in the opposite direction with an expiration time corresponding to the end of the observed period.

If a trader has analyzed the daily movement, then he should choose an expiration length of the rest of the session or an hour when it comes to work in this interval. When the price rises, the “Above” contract is opened; when the price falls, the “Below” option is bought.

  • In case of further growth or fall of the price by 25% (75% in total), the trader breaks the option “Within the range”, with the setting of the upper limit, which coincides with the entry point into the binary option “Above / Below”.

Let’s consider an example – a binary option “Below” was opened for the EURUSD pair, after the hourly candle crossed the 50 pips border and closed above this level. As mentioned above, such a movement is equal to 50% of the average daily volatility range for this instrument. The expiration time was chosen as 12 hours, exactly as long as it remained until the end of the session. The quotes continued to grow, but could not reach the signal line of +25 points, so there was no need for the combination, the binary option expired in the profit zone.

Combining different types and expirations in Binary options strategies
The correct choice of the range allows you to make profits even with strong trends , as can be seen in the growth of EURUSD on the first day of November. The binary option “Below” was opened already in the middle of the session and was combined with the contract “Within the Range” two hours after the opening.

Taking into account the remaining time until the end of the session, the second contract was chosen with a 12-hour expiration, subject to a 110% profit, if the price does not end the day within the price range of +/- 25 pips from the entry point, which happened at the end of the session.

Combining different types and expirations in Binary options strategies
If a trader had opened 1 option, he would have received a minus, having lost 100% of the investment, but as a result of the combination of binary options according to the Antipode strategy, the financial result was: minus 100% of the investment loss for the binary option “High / Low” and plus 110% of the profit on the “Within the range” option. The final result is + 10%.

General recommendations for using the strategy:

  • When trading on the daily and hourly timeframes, pay attention to the economic news calendar , avoid days with important events (more than 3 points);
  • On hourly candles, volatility in different areas can be heterogeneous, so determine it by dividing the day into segments of the Asian, American and European sessions ;
  • Do not enter the “High / Low” option after 20-00 Moscow time – the shorter the expiration time, the lower the premium for options associated with the range.

Combined Flat / Breakout Strategy

Combining different types and expirations in Binary options strategies

The combined flat / breakout strategy is based on the same principles of exploiting the knowledge of volatility and forecasting marginal changes within a day or hour as in the previous TS Antipode. Its distinctive feature is the orientation of the trader’s earnings during a period of market weakness – the inability of traders to form a directional movement.

Therefore, the construction of the strategy consists of the purchase of a binary option “Within the range” or “Without touch”, followed by the entry of the pending order into the contract “Above” or “Below”, which are located at the edges of the selected range.

Types of Binary Options in a Combined Strategy:

  • Contract “No touch” or within a range with customizable boundaries;
  • “Higher / Lower” (Call / Put) with a premium of 100%;
  • Expiration time with a choice from an hour to a day (and above);
  • The investment amounts in both options are equal;
  • Instruments – major currency pairs.

Tactics of work on the “Flat / Breakout” strategy:

  • Buy a “No Touch” or “Within Range” binary option by setting the lower and upper bounds at +/- 50% of the daily session range.

The second border is set equal in size to the first one from the entry point into the binary option. In this case, the premium for the option should not be lower than 100%. The expiration time of the contract is one day.

  • Set pending orders with contracts “Above” on the upper and “Below” on the lower boundaries to the level of the range of the binary option.

While the rate of a currency pair or other instrument is changing within the price interval selected by the first binary option, the trader only changes the expiration time for pending binary options. After working out one of them, the other order is canceled.

This tactic is justified by the fact that empirical observations show the presence of a stable trend when the price changes over 50% of the average statistical range. This guarantees the trader that a triggered one of the “Higher / Lower” options will become a guarantee of no return of the rate below or above the opening level of the day.

In general, the combination allows you to get a zero result if the price, instead of a flat, switched to a trend movement.

Let’s consider examples of using the strategy. As you know, the average range of EURUSD fluctuations is 100 points. Therefore, we will choose the “No touch” binary option with 50 pips boundaries. With the daily duration of the option in this case, the premium will be 101%.

Combining different types and expirations in Binary options strategies
The strategy allows you to trade every trading session, if a trader bought “No Touch” binary options on EURUSD during the whole August, then in 8 out of 22 cases they would close with a plus without combining with “Above / Below” contracts. Please note that in almost 50% of cases, quotes do not go beyond the 50-point zone marked with a yellow marker.

Combining different types and expirations in Binary options strategies
In other cases, quotes that exceeded 50 pips did not return above 50 pips in the opposite direction, which made it possible, after the expiration of the combination, regardless of the position of the quotes, to compensate to zero the loss of one of the options.

In fact, a trader who invested $ 200 at the beginning of the month would have managed to get $ 800 in net profit.

General recommendations for using the strategy:

  • The strategy works ideally according to the “night trading” strategy – the interval falling on the Asian session (except for the USDJPY pair ), on the hourly and four-hour timeframes;
  • A trader should avoid trading the combination strategy on days with significant news .

Profit hedging on binary options

Combining different types and expirations in Binary options strategies

Traders who trade the most popular Binary Options “Higher / Lower” often observe a situation when during the expiration time the rate of a currency pair moves in the right direction, but then reverses and the contract is closed without a premium, with a burned out investment.

The combined strategy of hedging profits allows the trader to remain with a “tit in his hands”, that is, to guarantee a positive closure of the current option in any scenario.

Types of Binary Options in a Combined Strategy:

  • “Higher / Lower” (Call / Put) with a premium of 100%;
  • Binary option “Touch” (“Barrier”);
  • Expiration time with a choice from an hour to a day (and above);
  • Investment amounts in the “Touch” option – 50% of the “Higher / Lower” contract;
  • Any tools.

Profit hedging tactics:

  • Choose a broker with the ability to independently adjust the level (strike) of the binary option “Touch” (One Touch);
  • Calculate the price distance to the strike at which the broker is ready to charge a 200% premium on this type of option;
  • Supplement it with a previously opened, valid binary option “Above” or “Below” whenever the price movement exceeds the distance calculated above, setting the strike equal to the entry level for the first contract.

Any broker charges a high premium for a barrier option, since it is difficult to execute – a trader makes a profit only if the price moves to one side after passing a certain number of points.

Therefore, one can easily secure the position from reversal by placing the “Touch” condition on the entry level. Choosing an investment of 50% of the size of a binary option “Above / Below” will halve its premium, but will provide a close to zero (and maybe more) in a negative scenario.

Let’s look at examples of using the combination. High rates for One Touch or Touch options can be obtained from brokers, starting from a distance of 25 points from the current price to the barrier that should be touched by the quote of the currency pair. Consequently, the strategy is realizable for an expiration period of 4 hours or more, since on average the volatility or range of a candlestick on the main pairs is 25 pips.

Many traders take the appearance of candles outside the volatility of 25 pips as a trend signal, believing that the price rally will continue in a given direction. In fact, in 50% of cases, there is a flat with a wide range.

As an example, below is a chart where the appearance of long hourly candlesticks on EURUSD did not lead to a trend, the price fluctuated in a narrow corridor for 8 hours.

According to the first four hours of trading, the trader could have expected the trend to continue, the forecast turned out to be correct, but the moment of entering the “Above” option was unsuccessful. However, the appearance of a candlestick at 25 pips served as a signal to combine the current option with a One Touch contract with a profit accrual condition, for which EURUSD quotes touched the level of the beginning of the first deal .

Combining different types and expirations in Binary options strategies
Unfortunately, the high volatility is taken into account by the binary options broker when calculating the No Touch contract premium, so the usual 200% rate was reduced to 186%, but the hedging paid off as the Above / Below option closed at a loss, which was compensated by 93%.

Combining different types and expirations in Binary options strategies
Notes on using the strategy:

  • Do not forget to align the expiration time of both contracts, it must be the same;
  • Pay attention to the condition of receiving the premium on the barrier option, it should be formulated as when the price is touched, and not when the “Above / Below” barrier is touched and closed.

The strategy can be viewed as a kind of “lock” – guaranteed locking of existing profits. The combination tactic is ideal for news trading if the trader is practicing a strategy of predicting future movement based on preliminary data from the economic calendar .

The only thing to keep in mind before starting a combination is that the news must be meaningful to cause volatility in excess of 25% of the instrument’s average swing range.

Conclusion

Combining different types and expirations in Binary options strategies

Combined strategies are the future of trading, each new instrument invented after securities opened up new horizons and opportunities for earning. The above material has shown how a simple combination of different types of binary options can minimize losses.

The use of the entire range of types of derivatives on the market to overlap (according to the described principle) areas of possible loss leads to the creation of “synthetic bonds” – strategies that have practically no negative outcomes.

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