The Straddle Strategy for Binary Options
Posted on July 12, 2013 by Nancy Eleutheriou
The straddle is one of the most effective binary trading strategies. As the name suggests straddling an asset refers to placing trades in order to cover both sides at once. It requires both CALL and PUT options to be purchased. This is one of the main reasons that the straddle is often confused with hedging, which also calls for the purchase of CALL and PUT options. The main difference between straddling and hedging strategies is that in the case of straddling the two conflicting options are not placed at the same time or even close together, but rather they are placed at the respective top and bottom of the trend being monitored.
As you can see straddling can be a very useful tool to capitalise on particularly volatile markets and also to cushion potential losses on a trade that is looking like it may be expiring out of the money. The downside of the straddle is that it only becomes useful in certain very specific situations that are not as forthcoming in times of low volatility. It is also risky in that unlike the above example it is also possible for both trades to expire out of the money.