In this binary options example, we will demonstrate how a simple binary options trading plan can be executed with a simple strategy on one of the popular underlying assets, which places value in the trader’s hands in the form of good profits.
The underlying trading example was executed on the Betonmarkets binary options platform, which is an example of a binary option proprietary trading platform. Proprietary platforms confer some reasonable trade flexibility in terms of the expiration time, the payout structure as well as the provision of certain tools of value that enables traders to analyze the underlying assets they are willing to trade. White-label platforms tend to have fixed expiration times and fixed payouts, which can limit the trader’s ability to get an outcome of value.
For this trade, we were looking for the following:
- A money-in-the-bank contract that was to deliver an assured result.
- A bet whose outcome was not very obvious, which would reduce the money to be invested in the trade while at the same time, giving us an increased payout.
- A binary options contract with a short-term expiration.
With this in mind, we selected the GBPUSD after performing the trade analysis of the option. The asset was selected because the chart showed not only a chart pattern of value, but also showed that the asset was about to break out of the pattern at a good price. The option contract had the potential of presenting easy pickings.
After analysis of the trade on Sunday June 23rd, the trading contract was executed at a strike price of 1.5371 on June 24th. The options contract was a High/Low contract, and because the pattern was a falling wedge (a bullish reversal pattern), we chose the HIGH option, betting that the option was going to end higher than the strike price of 1.5371. The expiration was set at 8 hours and the trading contract was executed, with about $267 being the capital invested as capital in the trade for a payout of $500.
This options bet closed at a price of 1.5439 8 hours later, and was settled in the money with the desired payout.
The key elements of the bet were as follows:
- Using technical analysis to discover a money-in-the-bank binary option. This sort of analysis is far better than gambling on the ultra-short term contracts where a trader is more likely to lose money than to make it.
- Deciding on the binary options trading contract to use. In this example, we chose the RISE contract, which was to bet on the option ending strictly higher than the strike price. Choosing this option enabled us to select an appropriate expiration for the trade, as opposed to the other version of the contract which would have pegged us to a minimum of 24 hours as expiry.
- Setting the digital options expiry as described in point (b).
- Deciding on how much to invest, taking into account proper risk management techniques.
- Deciding at what strike price to buy the trading contract. In this instance, the strike price was located close to the breakout point so the binary options trading contract was in the money from the get-go.
Once all these were done, it was a question of watching the trading plan play out as expected. The snapshot showing how much was made in this investment option on expiration of the bet is shown below:
Now this example is what we call a “money in the bank” market bet. Not bad for 8 hours of work and not a bad example of how to start off the week in the market.