We already talked about put and call options but there are many other thing one have to learn about binary options trading systems and strategies and find the best brokers in binary trading to trade with – such as Olimp Finance. What are fence options and another one – knock-out options? When to use them lets explain both term below.
Binary options trading methods: what are fence options?
The fence option is also named as collar. To explain he term in easy words, fence options are a binary option trading strategy which give a broker a special trading band of his or her commodity and underlying asset. That way his or her income is save and can’t be touched by any market movements.
Let’s give you some examples. One can easily write an out-of-the-money call option using some of their assets. Then, the binary trading broker put part or the whole of their premium in order to get out-of-the-money put option. What is important here is that the expiration date on both, put and call options has to be the same. The fence is here betting for the lowest as well as for the highest price speculated.
Costless collar is another interesting term in binary option trading strategies. It works in a way in which you get some income when you write a call option which is about your premium and the put option. Thus, both options give you a secure zero in the case of any misfortune.
Another example here can be as it follows: let’s assume we have to write a fence or collar option and the desired asset is $ 30. You can at the same time get a call option for about $ 40 at its strike price, or put option with the worth of $ 20. The income you get in any instance is equally worth as your premium. This way you can enjoy big profit and trade securely. You should remember that this type of binary trading options examples can’t secure you from any bad luck.
Another binary options strategy that works: a knock-out option
And what’s a knock-out option? It’s feel is to run out worthless, whilst the desired rate degree is overran. They limitate the capability profits for the client in choose of the holder, consequently they may be bought for a smaller top class than different options.
How does it work? An option writer writes a call option with a strike rate – for instance $ 60 – and a knock out degree – as an instance $ 70. It doesn’t let the option holder gain extra than $ 70 – at this point the option expires worthless. The factor is to constrain the loss ability for the option author. Knock-out options belong to the exotic options group and are more often than not hired for commodities and currency options.
On contrary – there may be additionally a knock-in option. In this case an option is nugatory till it reaches a predominated price.
Each of these options may be beneficial in a one-of-a-kind case, so ensure you use the option that suits the unique deal. An experienced broker – including Olimp Finance – will truly help you select the fine option and use it to your benefit.