Trading Crude Binary Options – Benefiting from Market Report Volatility

Trading Crude Binary Options – Benefiting from Market Report Volatility
Trading Crude Binary Options – Benefiting from Market Report Volatility
Trading Crude Binary Options – Benefiting from Market Report Volatility Getty Images

Trading Crude Binary Options allows traders to benefit from potential volatility prior to the Crude Oil Inventory Reports. While volatility in Crude is typical prior to the Crude Oil Inventory report, this volatility can be disastrous when trading Crude Futures. Even if a trader has a stop in place, because prices so fast, the stop price can actually be “jumped”. This means that since price never “touches” the stop price, the trader is, in essence, stuck in their position completely at the mercy of the market.

This is not an issue with Crude Binary Options. Binary options limit risk on entry and traders can never lose more than what they paid on entry. For example, on Wednesday, the Crude chart with the daily pivots indicated an upward movement. Price had fallen to the prior day’s support line and could not break it (around $44.17). A movement back up to the Pivot Line could be anticipated. An out of the money binary option strike price at 45.50 was available for $30 per contract, or $300 total risk, if trading ten contracts.

As the chart below shows (click to expand chart), as anticipated Crude moves up past the Pivot line around $45.50. Trading the Crude Binary Options results in a profit of $33.75 per contract or $337.50, if trading ten contracts (exclusive of fees). Trading the Crude Binary Options limited the potential risk while allowing a trader to take advantage of a potential high volatility movement.

Trading Crude Binary Options – Benefiting from Market Report Volatility

In addition to the trading Crude binary options, since a large movement was anticipated, a trader could also enter a spread option. A spread option on Crude Light was available with a floor value of 44.50 and a ceiling value of 47.50. The spread premium on entry was $45.20 resulting in a risk of $70 per contract or $700 if trading ten contracts. As price moves up as anticipated, the trader would realize an additional profit by utilizing the spread option, as well as trading Crude binary options. If the trader exits the spread when it reaches $46.06, then an additional profit of $86 per contract or $860 trading ten contracts (exclusive of fees).

By utilizing both the Crude Binary Options and the Crude Spread Options, the trader limited his risk to $100 per contract or $1,000 if trading ten contracts (exclusive of fees) while reaping profits of $119.75 per contract or $1,197.50 if trading ten contracts (exclusive of fees).

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Trading can be volatile and investors risk losing their investment on any given transaction. However, the design of Nadex contracts ensures investors cannot lose more than the cost to enter the transaction. Nadex is subject to U.S. regulatory oversight by the CFTC.