Discovering the Concept of Straddle Strategy

Discovering the Concept of Straddle Strategy

When you want to get success in the field of binary options trading, then you need to try your hands on different trading strategies. One vital strategy that you must try out is straddled strategy.

You follow one simple rule in the straddle strategy. You buy a call and put option with the same expiration date and price. Usually, the traders go for the straddle strategy when they feel that the price of the underlying asset will experience a lot of fluctuation and are unsure about the direction of the asset.

When the trader decides to buy both calls and put option, then it becomes easier for the trader to benefit from the price movement that occurs in both the directions. There is a big advantage if you decide to buy two options.

If the price movement is massive, then the amount that you win with one option will easily be able to cover the cost of buying another option. This means that you will still get a decent profit at the end of the day.

Straddle Strategy Example

Let us explain straddle strategy with the help of a practical example. When you buy two options, invest more on the option you are confident about. For example, if you are sure that an option will end in the money, then you can invest $20 on that option. You should invest less in an option for which you are not confident about. Let us assume that you invest $10 in an option for which you are not confident.

You will get a payout of about 6% on the winning trade. If one of your trades ends in the money and the other one ends out of the money, then you can still get a profit of about $26.

Total profit is $36- $10 and that equals to $26. This means that straddle strategy can be termed as a safe trading strategy provided you choose your options smartly.

How to Get Success with The Straddle Strategy

If you want to get the desired success with the straddle strategy, then it is important that you should be able to win about 100% of your invested amount. This is why you can consider applying the straddle strategy using the touch options.

When your prediction ends up right, then you can even win about 500% profit. You should go for two touch options when you expect the price movement to be massive.

You can also use a straddle strategy with boundary options. The boundary option can easily define the upper and lower price level. The benefit of going for the boundary option is that you will not have to buy two touch option in this scenario.

When you want to trade straddle strategy using boundary options, make sure that you go for a broker that offers you this option. Try out your strategy using the demo account and see if things work well for you. This way you will get a fair idea if you are comfortable using the strategy or not.

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