The use of binary options is not limited to speculators alone as most people think but the options are mostly used to help cut or reduce risks involved in trading. You can also use the help of hedging which is a form of binary options strategy while trading in binary options. With the help of this binary options strategy and many others, traders are in a better position to keep the profit potential of accessing new stock with most of the threat having been removed.
This traditional binary options strategy like many others is often connected to the stocks. For instance in binary options, the stock replacement strategy helps in saving money. If you use this strategy, you need to go for the money call options in place of shares which is simple and reasonably priced.
A good example is stock X which goes for $145 per share. Buying 100 shares may be quite expensive for some people because you also need to add the commission charges involved. In such a situation, employing a binary options strategy can be quite helpful. Instead going for the stocks, you can purchase the call options of X. In this case, it might cost you about $7, 695 which is almost half of 100 shares of stock X. Thanks to this binary options strategy, call options often give you a chance to purchase 100 shares of X.
When purchasing binary options, a trader is able to acquire the right to buy or sell stock and this is a right that enables you to make decisions which are related to the options.
Using a binary options strategy provides traders with many advantages, some of which are outlined below;-
- In binary options trading, the risks are reduced by up to half.
- Binary options offers diversified investments which means that you can save costs from one side and be able to invest the income elsewhere, a factor which reduces the risks involved in binary options trading.
- When a trader uses a binary options strategy, he can be sure of getting double the returns on his investments.
- If the options rise up, using a binary options strategy, traders are guaranteed of making a lot more because you will simply acquire more profits while using the call options.
- On the other hand if an option goes down by a certain amount, the percentage return is usually the same against that direction.
When you carry out a calculation using the description outlined above, you will be able to see that even though the risks are not eliminated when you use a binary options strategy, they are cut out to ensure that binary traders do not suffer great losses.
Therefore using any binary options strategy allows you to minimize risks and consequently save more money.