Types of binary options pt 1

What are Ladder Options?

Ladder Options are similar to boundary options but only one sided. A ladder option is only called a ladder because of the way a trader is presented with their choice of which option to trade. A ladder option is more like a typical “out of the money” option.

A word of caution when trading the ladder options, Check the chart settings and the expiration time of the option. Ladder options are usually listed for the 30 minute and on the hour mark. Most brokers show an 8 hour chart for the ladder options.

Enlarge the picture below to see a ladder option listing.

When are Ladder Options Used?

Ladder Options are for traders that want to increase their return by picking a strike price farther out of the money. Instead of choosing up or down on a regular binary option, the trader believed the price will have a meaningful movement. The ladder option gives a higher return than a standard binary options.

Traders will notice returns of 400%, 600% and even 1200% but that is because the probability of the asset hitting such a far price is very low. Day trader that trade the news will utilize a ladder option when there is breaking news and the asset is at the beginning of what will be a large price move.

The picture above shows ladder options on Oil. You will notice that the return for the highest level is 1273%. That is because the odds of the price on Oil rising $0.27 in the next 15 minutes at 10:45AM GMT is impossible. By changing the expiration time on the option to 12:00, the profit % drops to 600%. As the trading day goes on, and Oil starts trading in New York. The spread will go out to more than $0.27 and the profit percentage will also decrease.

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Review by John Barksdale

 

The following article Types of binary options pt 1 was originally published on: ORN Forex Trading