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Binary Option Strategy

Updated on July 12, 2014

Binary options are also referred to as digital options and fixed-return options. This is an exciting way to do online trading through wise prediction of the market price, including the currencies, stocks, and commodities but you need a good strategy. Anyone can do the binary options to earn money through online investment. Money is actually made through the binary options. The trader uses the invested amount to buy the contract. He decides the amount of money to be used for the contract, yet it is best to not commit too much for the trade to avoid risks. Another way to make money through binary options is by choosing the payout for the trade. The brokers determine the payout by default, which means the trade, will be adjusted according to the setting of the contract.

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The Pairing Strategy in Binary Options

Many traders and investors consider the Pairing strategy as the best one of the binary options because it involves a system wherein the profits are doubled, yet lessen the risks of losing in investment. By considering its functions in the trade, an investor may want to learn more about the binary options and how it is performed to earn money before he or she actually trade online. What is best about the Pairing strategy is that, whether your chosen stock went well in the trading system or not, you will still win because of the pair.

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Pair Options Trading

Predicting which stock will perform better in a given stock pair is the key in pairing options. As the selected stock performs well, you will get your payout. The payout for the pair stocks can reach up to 350%. To cite an example, you open a fixed pair option of $100 for a pairing stock of Stock A/Stock B. Assuming you chose Stock A as the one that performs better with a set of 85%.

How to Trade on Pair Options

To trade for a pair, you will open on UP, which also referred as CALL, if you think it will go up in the market. If you think the stock you chose will go down in the trade, you will open on DOWN, also known as PUT. If you predicted that, during the life of the stock, it will perform better, then, the pairing strategy is opted. Upon its expiration, and the one you chose went well, your “In the Money” payout will be given based on the percentage that was defined and set in the contract. In case it did not go well in the trade, with your option “Out of the Money” expires and yield you nothing. But because you buy a pair option, you can close a position in the trade even before it actually expires.

Trade Responsibly

  • Never invest more than you can afford
  • Never put all your money in one basket
  • Always double check your numbers before submitting a trade. You can easily misplace a decimal point!
  • Be patient. The stock market is not going anywhere. Research your trades first!

The first step in doing the Pairing Strategy is to choose the pair on which you want to make a trade. You can do that by scrolling on the Selector through the various pairs available. Then you will need to decide which type of pair options you want, a fixed one or a floating one. Once you have decided on the type, you will have to choose the time duration. The next step is to click on the arrow of the stock that you think will perform better. You will find that the percentage of the payout is already indicated in the trade. For example, if you chose Stock A with an 82%, your payout is 82% plus the amount you traded, upon expiration. The last thing to do is to decide how much you will invest in it. You can choose $100 and click the BUY button to officially enter your trade. Once you entered BUY, you will see a screen where you can monitor the trade and manipulate it according to its policy.

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Two Types of Pair Trading Options

Fixed Pair Options – When you choose the fixed pair options, it means that you determine the performance of the stock from its start to its expiry. The relative performance of the stock starts from the time you buy it until the expiry time that you chose. Your trade will be fixed and your payout will be based on the defined contract enveloped in it. The payout percentage is 86% and is defined at the time the trade started. In a Fixed Pair Option, when you call a $100 on a set payout of 86%, upon expiration of the trade and your chosen stock pair went well, you will get your $100 plus the payout of $86, for a total of $186. If the chosen stock did not perform better, your payout is 0. But since this is a Pairing Strategy, you can opt to close the position before it expires, and get the payout at a valued amount.

Floating Pair Options – When you choose the floating pair options, it means that you have the option to close the position of your trade to prevent loss and gain early profits once you determined that the stock is not performing better. The relative performance of the stock is based on the predefined period. Payouts for the Floating Pair Options can reach up to 350%, and this is indicated in the trade. If you determine that the trade is going down, you can close your position or sell it at the indicated value of the stock. It may not yield the 350% earnings, but it will still give you a payout based on the value indicated.

Risk Level in Pair Options

You can choose the risk level of your trade by considering the rate of return. The Floating Pair Options have a higher rate of return on the “out of the money” and a lower rate of return on the “in the money.” You can choose a lower risk by going for the “in the money”, but if you have the guts to go for a higher rate of return, yet on a higher level of risk, you can go for the “out of the money.” In Pairing Strategy, the choice is always yours in manipulating your earnings.

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    • Philip Borrowman profile imageAUTHOR

      Philip Borrowman 

      4 years ago from Aviemore

      Appreciate the comment! Thank you.

    • Pamela Kinnaird W profile image

      Pamela Kinnaird W 

      4 years ago from Maui and Arizona

      Wow, this sounds complicated. I guess that's why some people pay other people to figure it all out and advise them in simple phrases. Great hub, though. Dynamic and straight forward at the same time. Voting up and interesting.

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