If you are looking for high probability trades then binary options could offer another choice when scanning the market for possibilities.
Below is a chart of the Nasdaq 100 at 7:15 p.m. Eastern Time on Wednesday night.
If you wanted a high probability trade then you could purchase a binary option for the Nasdaq 100 to close above 4,612 on Thursday at 4:15 p.m. Eastern Time for $84.75. There are exactly 21 hours remaining until expiration. As long as the Nasdaq closes above 4,612, which is about 44 points under the current market, your trade will show a profit of $15.25.
Because you’re risking $84.75 for a max profit of $15.25, you would need to be correct about 6 out of every 7 trades in order to be profitable assuming you held this position until expiration. You would be risking about $5.56 for every $1 of potential profit. Remember that you could always cut your losses and use a stop-loss of around $50 should the Nasdaq 100 approach the strike place level of 4,612 at any point tomorrow. When a binary option is trading at its strike price the market will be at about $50, minus the bid/ask spread (there is theoretically a 50/50 chance that the underlying market will close on either side of that price when it’s trading exactly at that level).
If you used a stop-loss of $50 then you would only be risking $34.75 for a max profit of $15.25. This would bring your risk vs. reward down to $2.28 risked for every $1 of potential profit.
This is an example of a high probability trade that you can place overnight. Don’t confuse high probability with highly profitable. The profitability of this trade will depend on the market direction and your trading methodology.
You are going to be correct much more often than you’re wrong in the position I talked about, but you also have to keep in mind how much more you are risking vs. your potential max reward. As long you are properly managing your risk vs. reward, binary options can be a profitable way to make high probability trades in the markets.