Strangle Strategy for digital transactions cannot be attributed to the complex ones. At the same time, it is officially authorized in the markets, and its essence lies in the fact that a trader can buy opposing contracts Call and Put at the same time. Herewith, the time of expiration of each bargaining may be different.
This strategy allows minimizing the risks to some extent, especially if the investor is working with a tool that allows the early sale of the lot with a lower premium.
It is important to note that the “Strangle” is the best applied when the big movement is predicted on the market. For example, such moments may occur during the periods of macrostatistical important data output. In order to use this methodology in practice, the trader must carefully examine the economic calendar of Binary Options to find the time of publication of these or other important data. It is necessary then in a minute before to purchase contract Call and Put. As seen from the above, the “Strangle” is a very simple strategy. The investor is not even necessary to analyze the current market situation or to use binary option indicators.
Once a trader can see that the price has gone in one direction or another, he can sell unprofitable option with fewer losses and wait for the expiration of the profitable one. This is the essence of the Strangle. In this case, the trader in order to increase the potential profit can open another deal in the direction of market movement. It should be noted that if only two opposite options are bought the profit as a result will not be very big, because the broker will offer to buy an unprofitable option on favorable terms. However, despite this, the income from operations for such work will still take place.
In addition, the Strangle Strategy can be used by traders to hedge their own risks. Indeed, despite the relatively small potential profit, the trader carries less risk, as if he had bought a binary contract in one direction only. By purchasing various items on this system, it is practically impossible to make a wrong prediction. After investor bought binary options on both sides he can count on one of the two profitable trades when the price will go in one of two directions.
Also, for this method any volume indicator can be used. This important auxiliary tool does not show the direction of market movement, but demonstrates the trader that the market is increasing the volume and, therefore, the activity will begin soon. Once this happens, the trader can also take advantage of Binary Options Strangle strategy or any other Binary Options strategy that will fit in a particular case.
That’s all for now. Got any questions? Just ask the expert!