This-Strategy-Benefits-You-Mostly-When-You-Have-Tw22

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					 This strategy benefits you mostly when you have
   two options with a range of expiry, where both
options could be in the-money. Then you are able to
  minimize your risk but also maximize your gain.




Best Binary Broker
This option is popular in forex binary options, in which the value of
the currency can change very quickly in either direction In this
scenario, hedging could be a viable option for reducing risk to the
trader Take the following scenario of a forex binary option based on
the price of the Euro The Euro has been rising and is predicted to
continue to rise at a determined breakout point At this point you
would place a call, expecting the Euro to rise But what if the price
changes quickly and falls? You can place a put option at another
point, helping you to minimize risk in the event that the price indeed
falls In the above scenario, you have placed a call for $500 at the
option price of 5
1 You have also placed a put for $500 at the option price of 5 3 The
following outcomes could occur: The Euro price could expire at 5 1
exactly, making your call option at-the-money You would receive
$500 in return of your initial investment In this case your put option
would be in-the-money, and you would receive $850 on your initial
investment
 Total investment= $1000 Profit= $350 This trade would end up
being a net gain (-500 + 500 + -500 + 850) The Euro price could
expire between 5 1 and 5 3, making both your put option and your
call option in-the-money You would receive $850 for both trades
 Total investment= $1000 Profit= $700 Best Binary Broker (-500 +
850 + -500 + 850) This trade would end up being a net gain The
Euro price could expire below 5 1, making your call option
out-of-the-money You would receive $75 in return of your initial
investment In this case your put option would be in-the-money, and
you would receive $850 on your initial investment
 Total investment= $1000 Profit= - $75 (-500 + 75 + -500 + 850)
This trade would end up being a net loss, but you still lose much less
than you stand to gain in other scenarios The Euro price could
expire above 5 3, making your call option at-the-money, and you
would receive $850 in return of your initial investment In this case
your put option would be out-of-the-money, and you would receive
$75 in return of your initial investment Total investment- $1000
 Profit= -$75 (-500 + 850 + -500 + 75) This trade would end up being
a net loss, but you still lose much less than you stand to gain in other
scenarios The Euro price could expire at 5 3 exactly, making your
put option at-the-money You would receive $500 in return of your
initial investment In this case your put option would be in-the-money,
and you would receive $850 on your initial investment
 Total investment= $1000 Profit= $350 (-500 + 850 + -500 + 500)
This trade would end up being a net gain In each scenario, you
stand a chance of winning a greater profit by hedging, or placing two
bets in opposite directions, than the all-or-nothing chances of one
binary bet In the instances in which you stand you lose money, you
lose far less than the possibility you have to gain a greater profit than
loss in other circumstances
Best Binary Broker

				
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posted:7/25/2012
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Description: Total investment= $1000 Profit= - $75 (-500 + 75 + -500 + 850)