strategy

Binary Options Strategy

A Simple Binary Options Strategy That Puts the Odds in Your Favour

Watch this video first – it will demonstrate a simple binary options strategy that profits using a money management plan.

Since binary options always have an absolute outcome (you either win or lose – nothing in between) then one of the most important factors in any good binary options strategy should be your money management program. If you use this in conjunction with a simple trend following strategy, you’re putting the odds in your favour and it should be unlikely that you will fail.

In case you’re new to binary options, they’re not like normal options. You’re essentially betting on a short term outcome of any underlying security. If you’re right, you get paid, if not, then you don’t – simple as that. However to make it appealing, profits from any one trade are usually around the 70 percent mark, so if you invest $100 you receive $170. If you lose, you get nothing (some brokers return a small percentage). It’s like betting on place dividends in a horse race, only in this case each race has only two horses – “in-the-money” or “out-of-the-money”.

The strategy we are about to outline is an extension of what you have seen in the video. We have refined the numbers to make it easier for you. You will also need a spreadsheet so that you can calculate the amounts you will invest on each trade. You can use this strategy for either short or longer expiration times, but it’s better suited to short term, say, 15 minute expiration periods on forex pairs for example.

Try This Binary Options Strategy

1. You should start with at least $500 in your brokerage account. $1000 is preferable because it gives you greater odds for success, as we shall see.

2. Your initial trade should be no more than one percent of your overall bank. So if you have $1000, your first trade will be for $10.

3. Pick a forex pair, or another underlying security that you’re familiar with and that is highly traded. Your objective will be to trade with the trend.

4. Now look at a 5 minute price chart of the underlying. The better binary options brokers will provide this as part of the service. Look at the chart from left to right and observe if there is a trend – either up or down. If it’s going sideways, disregard and move on to another security.

5. When you feel satisfied you’ve found a trending security, then enter your first trade with just $10 and choose either “up” or “down”. Within the next 15 minutes the underlying price action will either be above or below your designated strike price. If you’re right, you come out with $17. You walk away and start this binary options strategy over again. If you’re wrong, you’ve lost $10.

6. Now here’s where it gets interesting. If you’ve lost on your first trade, here’s what you do:- From your spreadsheet, you will now calculate the next trade amount. This will be your original $10 multiplied by 2.5, so $10 becomes $25 etc. If you win this trade at 70 percent profit you will now be $33 ahead and at this point, you start the system all over again. But if you lose your second trade, you will now be down $35. So your next trade will be $25 x 2.5 = $63 and so on.

This system will allow you to lose up to 5 times in a row before your capital is at risk. Should this unlikely event happen, considering that you’re trading with the trend, you may need to reassess your next move – perhaps by accepting your losses and starting again by building up from a lower trading amount again. If you keep getting it wrong more than 7 times in a row then maybe you shouldn’t be doing this in the first place.

Victory Spreads Options – ‘Return on Risk’ on Steroids!

Victory Spreads – Low Risk Option Trading at its Best

Victory spreads are a powerful yet simple way to make money with options. They are an extremely low risk trade but with unlimited profit potential. It’s potential “return on risk” is massive if the underlying moves in the direction you anticipate, which means that you only need a few of these to work out for you each month and it’s almost impossible for you not to make an overall profit . . . . .

Here’s the Video Version – Scroll Down if You Prefer to Read

This option spread is an option trading strategy that was developed by a veteran trader of 30 years, who ran a brokerage firm in New York city. He was going to retire but decided not to. Instead, he now runs a small hedge fund that only does the Victory Spread strategy.

You may have heard of back-ratio spreads (some call them ‘vacation spreads’). The Victory Spread is similar in approach to the back-ratio spread, but the way the deal works out is so much more favourable to the person putting it on. You can risk as little as $20 to $50 on one of these trades, but when they pay off, the return is in the thousands so the return on risk is most impressive. You can even sometimes make a small profit when the underlying price action doesn’t move as expected – and even if it really tanks you might lose around $15. It’s almost a risk free trading strategy!

Here’s an example of a Victory Spreads Risk Graph.

Notice the unlimited potential to the upside with negligible risk to the downside.

More Info on Victory Spreads Options Strategy Here

Victory Spreads – A Better Alternative Than The Straddle

The best stocks to use this strategy on, are ones currently in the news, or that you believe may be due for a large move to the upside before the expiration date of one leg of the option spread. A prime target would therefore be, companies which are due to release favorable Earnings Reports in the near future. But companies with rumors around about being possible takeover targets are best for this particular strategy, because once the bid is made, the price invariable goes up quite dramatically.

You can just “set and forget” these kind of trades, because one leg of the trade involves a long dated option. You can also take positions where the prospective outlook is either to the upside OR the downside – in other words, using both call and put options.

The secret to profitable Victory spreads, is how you structure them. It’s not a difficult or complex operation – very simple in fact – but you will need a brokerage account such as ThinkorSwim which allows you to graphically analyze your trade before you execute it. If you’re not with ThinkorSwim, you’ll need some other options analysis software.

If you don’t want to pay for this, you can get a free Excel based options strategy evaluation tool by Peter Hoadley that gives you a nice pay-off diagram.

The Victory Spread is explained fully in module 11 of the Trading Pro System – a series of downloadable videos that teach you a number of safe and consistently profitable option strategies for regular monthly income.

However, if you don’t want to pay the full price of the complete Trading Pro System package, they are also selling a singular video exclusively about the Victory Spread for only $27. Believe me, if you know how to use this strategy, that price tag seems a small price to pay for inside knowledge about a virtually zero risk option strategy with massive profit potential.

More Info on Victory Spreads Options Strategy Here

Dow Jones Stocks Option Trading

Dow Jones Stocks Option Trading – A Good Strategy

This article is not about trading the Dow Jones index. It is about Dow Jones stocks option trading each of the individual stocks that make up the famous Dow Jones Industrial Average. The advantages of high liquidity and ease of entry and exit make this a very attractive trading model.

If you’re an option trader and your main objective is to be able to quickly and efficiently create option positions with high ‘open interest’ and therefore great liquidity, then Dow Jones 30 stocks option trading on the underlying stocks that make up the Dow Jones Index might be just right for you.

The Dow Jones Industrial Index (DJIA) is made up of 30 large companies based in the USA. They all have options, so all you need to do is find a list of the DOW 30 together with their stock symbols and create a watchlist in your charting package or broker account. Once you have that, simply analyze these price charts on a daily basis, looking for familiar patterns that to you, mean trading signals according to whatever criteria you use.

Because the Dow Jones stock are so highly traded, you can not only do straightforward buys of call and put options, but is is also much easier to create advanced options positions such as condors, butterfly, calendar and ratio spreads. These involve a combination of long and short positions which can involve a wide spread of strike prices. The DOW 30 is one place where you shouldn’t have any trouble locating “way out of the money” option strikes which still
have great open interest.

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Have You Seen MarketXfactor Yet?

MarketXfactor is a proprietory stock chart indicator developed by Dave Vallieres, an option trading veteran with over 25 years experience in the industry. It has proven to be deadly accurate in virtually all market conditions. It is available for ThinkorSwim or Tradestation trading platforms. It works on all major indices such as the DOW, S&P500, Nasdaq etc and their associated ETF’s such as the DIA, the SPY and the QQQ – as well as all the major stocks on that make up the Dow 30. You could actually use this indicator as your main tool for an option trading strategy that focused exclusively on the top 20 of the 30 stocks that make up the Dow Jones Industrial Average.

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Some option trading educators adopt the policy that it is a good idea to have a limited number of stocks that you follow anyway. The idea is that you ‘get to know’ these stocks intimately and become familiar with the way they trade. They become your trading ‘friends’ and you know which signals are the most reliable for each of them. Dow Jones 30 stocks option trading on just thirty stocks is a good sized watchlist for anyone, so you should have no problem finding enough trades.

Strategies for Dow Jones Stocks Option Trading

You can also use the Dow 30 stocks for range trading strategies, delta neutral strategies, as well as vertical spreads, calendar spreads and ratio spreads.

It’s important that whatever option software you are using to trade these options, has the capability to give you the current implied volatility (IV) in the option premium compared to the historical volatility (HV) of the underlying stock. Due to the high ebb and flow of demand for Dow 30 stocks, their option prices can sometimes be overpriced or underpriced. This is critical information that you need to know, particularly if you’re considering using spreads or straddles.

Straddle options should always have low implied volatility and therefore be underpriced. You want them cheap so that if the stock price explodes, the increase in implied volatility in the option premiums that often comes with increased buying or selling volumes will add to your potential profit.

For spread positions, you should prefer higher IV on the short (sold) leg of the position compared to the IV for the long (bought) leg. This will give you an edge, particularly if the stock doesn’t move in your anticipated direction. It isn’t a problem if the IV is the same, but you definitely want to avoid spreads
where the IV of the long position is greater than that of the short leg.

The Dow 30 stocks tend to trade in predictable patterns which produce reliable indicators and therefore, can be stocks of choice for better trading results.
This is a major reason why I have found MarketXfactor to be a most accurate and reliable tool for Dow Jones 30 stocks option trading.

If you decide to adopt these large US companies as your option trading friends, you should look for a reputable broker based in the USA that allows you to easily fund and withdraw from, your account from anywhere in the world, as well as analyze your positions. We recommend the ThinkorSwim platform. Set up your watchlist, wait patiently for the right entry signals, stick to your plan, manage your trading capital carefully and there is no reason why you shouldn’t realize some consistent cashflow.