In trading, not only do binary options offer an opportunity to make a lot of profit with small shares in the market, but they offer the trader a hedge of monetary positions.
Explanations of the concept of coverage
What is called hedging is the action of reducing the risks that the trader has on his positions. For example, a trader may sell down an asset to minimize the risks of a long call position. Traders use the hedging of their positions when information is expected and this information can lead to price volatility, creating hesitations.
Using the binary options market to cover hidden risks
Let’s take the example of a Euro trader, who seeks to cover his long pound of euro / dollar, just ahead of the announcement of the ECB’s take-off, concerning the interest rate. In parallel with the period of the ECB’s declaration, the trader could buy a discounted option, to take advantage of the national value of the EUR / USD position which remains unchanged. It would then have protection if the announcement of the ECB was to shake the market for some time, or longer. Admittedly, on this euro / dollar position, the trader could experience some losses unrealized, but which are however offset by the benefits in the binary option below.
Evaluate market coverage
One way to calculate your coverage is to determine how much you could lose depending on a specific event or press release. Determining in advance your potential losses based on specific news helps you assess your coverage. To build a hedge portfolio, the trader can use a number of additional binary options. To cover long and short positions, the trader can opt for a hit or miss option. At the limit, a miss option may be the effect of a covered call option. The observation of the long position on the euro / dollar would allow the trader to acquire a longer option over the market.
Using the Market
If the market is up, the long position on the euro / dollar would offset losses on the miss option. Conversely, the losses of the monetary position below would be filled by the profits on the miss option if the market is down. Cautious trading is largely made up of hedging, or hedging in English. Traders could use binary options to spare their exposures. Note that currently it is possible to make online trading on mobile, with smartphones and tablets, with data more complex compared to the computer entry of traditional sites.For more in this visit http://fraudbroker.com/blog/strategy/grade/.
Payments vary depending on the asset and the expiration time. The differences can be significant, so traders who want to use binary options in the long term should make purchases to find the best payout for the class of assets (or classes) they intend to sell.