What is Range Binary Option Trading?
Range trading allows the binary options trader to make a prediction as to whether a specific stock, indices, currency or commodity will finish between two prices within a set time period. The two prices are referred to as the upper strike price and the lower strike price.
If the trader decides his selected binary option will finish within a set range within a predetermined period of time, he will purchase an ‘In’ trade. If the trader believes the price of the option will finish outside this range, he will purchase an ‘out’ trade. If the trader selects an In trade and his option price does in fact finish within the range, he will be in the money.
Example:
Nina has been watching the Currency markets over the past few days, and has been paying special attention to the GBP / USD exchange. Using technical analysis , she has noticed that during the third hour of the markets being open, the exchange rate tends to settle in its volatility and does not significantly fluctuate in its movement. Her fundamental analysis tells her there have not been any major news events, and there are no economic or political announcements scheduled. She therefore decides to purchase a one hour US $250 in trade option.
Nina therefore believes that the price of the GBP / USD exchange will finish between the upper and lower strike price. In this instance the range option was purchased at a price of 105.916, and the lower strike price was set at 105.680, with the upper strike price at 106.451. If by the end of the hour the price of the GBP / USD finishes between 105.680 and 106.451, Nina will be in the money. The return is 81% and so when GBP / USD closes at a price of 106.324 Nina is very happy because she has just earned $202.50.
Nina now believes the price of the EUR / USD will finish outside the range after one hour. She therefore uses her profits to purchase a one hour out of the range option for $200. The starting price is 1.376 and so for Nina to be in the money the price will need to finish either above the upper strike price of 1.379 or below the lower strike price of 1.372. As the trade progresses Nina is pleased to see the Euro is improving in value against the dollar and by the time of expiration the price is 1.384. Nina is in the money and has earned an 81% return on her $200 investment, meaning she has profited by $162.
Trading Strategies Explained
A number of basic trading strategies are explained in the Option Range eBook . Once traders are registered with Option Range, they will receive regular trading strategy tutorials that will help to extend and improve their trading knowledge, and their binary option trading strategies.
By following the tutorials, traders on the Option Range binary option trading platform have the chance to improve their understanding of the digital trading instruments, the tools and the strategies that can be used to help to see significant profits and returns on investment.
