What is your strategy in binary options?

Hello.

I am newbie in option trading and would like to get advice from experts there on what are the essential rules preventing losses and how to work out profitable strategy?

Of course nobody wants to share their secrets because it is most valuable they have. But I just want be shown right direction from where to start from and where to go..

Thanks in advance.

 

stay away from it ..

 

Average into trades. That's the key

 

Huh?

OK, disregard the averaging comment. Don't trade OTC digitals. The edge loss is far worse than in listed FX ETFs. Stick to touch and double knockouts if you're going the OTC route.

 

read lotsa books about options, etc
practice with play money
do vanillas, not binaries

 

Sorry, off topic. Why is there an edge loss in FX ETFs?

It has tight spreads.

 

The point is that the OTC binary is a synthetic vanilla vertical. The payoff of let's say a 30/100 digital is a three-dollar, ten-wide vertical. Don't trade OTC binaries unless you need the OTC conventions (duration and price-granularity). There is no easy replication for a touch option, so you would want to seek-out an OTC touch if path-dependence is a requirement.

 

downpruf,

You should really stop flipping between the Wilmott forums and this place. However, your presence and help is always appreciated.


doggyfx,

I suppose you cut your teeth trading fx. So, you know risk/reward, sizing, and leverage. Good. Go to the CBOE site, register and study all the basics. The study material goes thru a progression with quizes. If you get burnt out, watch a few Tastytrade videos on youtube on subjects that seem familiar to you.

Then, you might have a decent start. Feel free to ask us on any questions that may hang you up.

And like downpruf said, don't trade Binary options. (Or at least don't ask us how.)

 

All I am stating is that a binary is equivalent to a vanilla vertical spread. The payoff of the binary (ATM fairval of 1/2, 50/100) alludes to the payoff of its vanilla-equal. The edge will always be worse than the vanilla exchange offering due to dealer vs. auction market and the bespoke nature of the product. The OTC edge loss will always be greater, but you can get discrete with strikes, size and duration.

There was some mis-pricing at Trinitas on DNTs and at Oanda on fwd-starts and digitals, but both dealers are gone (in vola).