Binary Options Hedge binary option Hedging Methods In this article I am going to discuss and explain you some hedging methods that you can try with Binary Options contracts. First of all, I want to explain what is exactly hedging. Hedging is a way to reduce the risk of your trades. This strategy is not easy because it’s difficult to find the righ setups.
It’s a strategy about two contracts with different strike price to the same asset. This binary option chart is from GBPUSD currency pair. The general idea of this strategy is to create bounds for the same asset with two contracts. To create an ideal straddle you must find the higher level of a trading period and take a call and the lowest level of a trading period and take a put. That’s why this strategy is not easy, because is a difficult to predict the highest and the lowest level of a trading period. Now let’s see the possible scenarios.
The put contract expires after the reversal in the support and it’s in the money. Five minutes ago we took a put in the support which expires in the money,too. So, in the first scenario we have 2 ITM trades with a high reward. In the second scenario our first put trade will be in the money but let’s assume that the support will not stop the price for our call like the next time that the price test the support in the chart. So, we have an ITM put and an OTM call.
This means a very small loss for us. So, if a trader will create a good straddle the possible scenarios are a high reward or a very small loss. Some more binary options hedging strategies These strategies are mainly for binary options trading in an exchange and are about hedging the same or different assets. GBPUSD and USDCHF are two currency pairs which usually moving opposite to one another. This is from GBPUSD currency pair.