Trading futures using binary options allows me to limit my risk even at the opening of the US session. In the examples below, price was setup to move down at the open. However, the typical behavior at the open is for price to go against the position and then return in the overall direction. Limiting risk during this period is critical for traders to survive the opening action.
Trading Futures Using Binary Options
Using a 3-minute chart on the Nasdaq and Dow (eminis), price was trading below the low of the range all morning. When the market goes into a tailspin, it can be fierce and that was what was happening this morning. I opted to go ahead and place shorts on both futures because although it could go up at the open, if it decided to fall, then it would be quick and fierce.
Trading futures using binary options limits your risk: Risk on the Nasdaq was $24.75 per contract; Risk on the Dow was $26.50 per contract. As anticipated price moved up and then turned violently to the downside. Both profit targets were filled resulting in a profit of $65.25 on the Nasdaq and $63.50 on the Dow. Although this was a risk trade, the fact that I could limit my risk was the most important aspect because by limiting the risk, I could increase the profit potential.
The Out of the Money binary options provide an ideal environment for using low risk high reward opportunities. Since each binary has a maximum payout of $100, the trader has more reward (typically around $70 after the risk) than risk on the table.