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Options strategy exact entry

The Exact Strategy for Binary Options

By Noble DraKoln Updated Aug 17, In trading, there are numerous sophisticated trading strategies designed to help traders succeed regardless of whether the market moves up or down. Some of the more sophisticated strategies, such as iron condors and iron butterflies, are legendary in the world of options. They require complex buying and selling of multiple options at various strike prices.

The end result is to make sure a trader is able to profit no matter where the underlying price of the stock, currency or commodity ends up. However, one of the least sophisticated option strategies can accomplish the same market neutral objective with a lot less hassle.

But before I get to volatility I want to discuss the indicator I use for my high-probability options strategies. I often asked by readers what indicators I use, so…here you go. They will try to teach you about their long list of indicators to make themselves look impressive, but in reality most are horrible traders over the long term because they overwhelm themselves with the latest and greatest indicators. I keep it super simple when I trade. I pick one tool and I use it for its specifically intended purpose.

The strategy is known as a straddle. It only requires the purchase or sale of one put and one call to become activated. In this article, we'll take a look at different the types of straddles and the benefits and pitfalls of each. Types of Straddles A straddle is a strategy accomplished by holding an equal number of puts and calls with the same strike price and expiration dates.

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The following are the two types of straddle positions. Long Straddle —The long straddle is designed around the purchase of a put and a call at the exact same strike price and expiration date. The long straddle is meant to take advantage of the market price change by exploiting increased volatility. Regardless of which direction the market's price moves, a long straddle position will have you positioned to take advantage of it. Short Straddle —The short straddle requires the trader to sell both a put and a call option at the same strike price and expiration date.

Options Strategy

By selling the options, a trader is able to collect the premium as a profit. A trader only thrives when a short straddle is in a market with little or no volatility.

If the market develops a bias either way, then the total options strategy exact entry collected is at jeopardy. The success or failure of any straddle is based on the natural limitations that options inherently have along with the market's overall momentum.

Options Trading Strategies: A Guide for Beginners

The Long Straddle A long straddle is specially designed to assist a trader to catch profits no matter where the market decides to go. There are three directions a market may move: up, down or sideways. When the market is moving sideways, it's difficult to know whether it will break to the upside or downside. The trader can hedge his or her bets and pick both sides simultaneously.

Understanding Straddle Strategy For Market Profits

That's where the long straddle comes in. By purchasing a put and a call, the trader is able to catch the market's move regardless of its direction. If the market moves up, the call is there; if the market moves down, the put is there.

What is best strategy for option trading? All About Options Strategy Options provide 3 key benefits - increased cost efficiency, potential to deliver better returns and act as a strategic alternative.

In Figure 1, we look at a day snapshot of the euro market. This allows the trader to avoid any surprises.

Drawbacks to the Long Straddle The following are the three key drawbacks to the long straddle. Each at-the-money option can be worth a few thousand dollars. So while the original intent is to be able to catch the market's move, the cost to do so may not match the amount at risk. How quickly a trader can exit the losing side of straddle will have a significant impact on what the overall profitable outcome of the straddle can be.

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If the option losses mount quicker than the option gains or the market fails to move enough to make up for the losses, the overall trade will be a loser. The final drawback deals with the inherent makeup of options. All options are comprised of the following two values: Time value —The time value comes from how far the option is from expiring. Intrinsic value —The intrinsic value comes from the option's strike price being options strategy exact entry, in, or at the money.

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If the market lacks volatility and does not move up or down, both the put and call option will lose value every day. This will go on until the market either definitively chooses a direction or the options expire worthless.

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The Short Straddle The short straddle's strength is also its drawback. Instead of purchasing a put and a call, a put and a call are sold in order to generate income from the premiums. The thousands spent by the put and call buyers actually fill your account.

This can be a great boon for any trader. The downside, however, is that when you sell an option you expose yourself to unlimited risk.

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As long as the market does not move up or down in price, the short straddle trader is perfectly fine. The optimum profitable scenario involves the erosion of both the time value and the intrinsic value of the put and call options.

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This can occur anytime during the life cycle of a trade. If this is not done, the only choice is to hold on until expiration. When Straddles Strategy Works Best The option straddle works best when it meets at least one of these three criteria: The market is in a sideways pattern. There is pending news, earnings or another announcement. Analysts have extensive predictions on a particular announcement.

Understanding Straddle Strategy For Market Profits

Analysts can have tremendous impact on how the market reacts before an announcement is ever made. Analysts may make estimates weeks in advance of the actual announcement, which inadvertently forces the market to move up or down.

Whether the prediction is right or wrong is secondary to how the market options strategy exact entry and whether your straddle will be profitable. After the actual numbers are released, the market has one of two ways to react: The analysts' prediction can add either to or decrease the momentum of the actual price once the announcement is made.

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In other words, it will proceed in the direction of what the analyst predicted or it will show signs of fatigue. A properly created straddle, short or long, can successfully take advantage of just this type of market scenario.

This strategy allows you to receive signals with a high accuracy and further buying options to determine the right direction in which the price will be changed in the future. The exact strategy for binary options is very simple and its use even for beginners.

The difficulty occurs in knowing when to use a short or a long straddle. This can only be determined when the market will move counter to the news and when the news will simply add to the momentum of the market's direction. Conclusion There is a constant pressure on traders to choose to buy or sell, collect premium or pay premiums, but the straddle is the great equalizer.

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The straddle allows a trader to let the market decide where it wants to go. The classic trading adage is "the trend is your friend. Compare Accounts.