Trading Market Direction Two Ways

Trading Market Direction Two Ways
Trading Market Direction Two Ways
Trading Market Direction Two Ways Getty Images

When first trading binary options, most traders choose one side of the trade or the other, and look to profit if their binary option expires in-the-money for full value of $100. As you become more comfortable with the binary option market, there are various ways to trade multiple contracts simultaneously to profit from underlying moves. One methodology to consider is trading both sides of a binary option market to profit from volatility in either direction.

If you’re looking for a large move in either direction then binary options provide the ability to lock in defined risk while setting up trades than can profit from underlying moves in both directions of an underlying market. With the Fed set to make an announcement tomorrow afternoon regarding interest rates and Non-Farm Payrolls due out Friday morning, not to mention the stream of earnings all week and election anticipation, Gold has plenty of news driven events that could move the price of this precious metal before Friday’s close.

Here we see a chart of the indicative index, which is based off the December Gold COMEX/NYMEX Futures price, as of about 7:25 a.m. ET this morning. Listed along the right axis are the weekly binary strikes with their relative market quote.

 

Trading Market Direction Two Ways

If you happen to be bullish Gold for the week then you could buy a binary option above or below the current market depending on your target expectation. Bearish? Then you can sell any of the binary option strike depending target and the risk vs. reward desired.

Of course having no directional bias but expecting volatility, you could consider trading both sides of the market, while keeping your risk defined, and profit from moves in either direction!

One possibility of a 2 sided trade could be buying the >$1,307.50 Gold binary option for $16 while simultaneously selling the >$1,267.50 Gold binary option at $84 (you have $16 of defined risk when selling this binary option at $84). Both of these binary options expire at 1:30 p.m. Friday. With a combined $32 at risk when initiating the two trades, you stand to make $68 if either side of the trade expires in the money.

Even when making 2 trades on both sides of the market, you still only risk $1 for every $2.12 of potential profit if either side of the trades expires in the money. With Gold currently trading at $1,287.407, the underlying precious metal would have to move more than about $20 in either direction prior to expiration for this trade to be profitable.

Binary options can provide traders with a multitude of strategies, all of which include defined risk. The next time you’re scanning the market for profitable trades, consider the binary option on the Nadex Exchange. You can open a demo account with $25 K of practice funds to see for yourself the types of multi-leg trading strategies that are possible.

Note: Exchange fees excluded for calculations.

The information contained above may have been prepared by independent third parties contracted by Nadex. In addition to the disclaimer below, the material on this page is for informational and educational purposes only and should not be considered an offer or solicitation to buy or sell any financial instrument on Nadex or elsewhere. Please note, exchange fees may not be included in all examples provided. View the current Nadex fee schedule. Nadex accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representations or warranties are given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk and any trading decisions that you make are solely your responsibility. Trading on Nadex involves financial risk and may not be appropriate for all investors. Past performance is not necessarily indicative of future results. Nadex contracts are based on underlying asset classes including forex, stock index futures, commodity futures, cryptocurrencies, and economic events.

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