Hi, guys! Like ammeo I also like mostly the swing trading style. I don't like short term scalping because it is psychologically exhausting to change your direction in a matter of minutes and event seconds. Especially in binaries I found the best opportunities in daily and weekly expirations.
Last edited by LesterK; 01-11-2013 at 12:27 PM.
@fxeconomist ::Wt is pinning?...heard of it first time...
As "swing trading" and "scalping" are underlying trading strategies, pinning is an option-only trading strategy.
It first emerged from vanilla option traders. Pinning, in this case, refers to trading the underlying stock when its price is around an option strike, and expiry is near (like days). Game goes like it's described here: http://tradenakedoptions.com/2009/02...ks-get-pinned/
Pinning has more meaning as a binary option trading strategy. If you would be able to trade your Up and Down options as trading instruments, at real prices, you might have a tendency to trade it around the strike. Say you look at the Up, and strike is 7000, underlier quotes 6999.80. If you're at 50% lifetime of the option, you could probably buy it for 40, but if it's in the last minute, for instance, you could buy it for 10, let's say. So you buy the option @10, and you hope underlying crosses the pin and your option ends up in the money, you get 90 net profit. An Up/Down option has a more violent value switch around the pin by the time goes by.
Similar it can be done with One Touch. I've done it countless times. I didn't even feel the risk. I was selling @87 , risking 13 units (euros in my case). I got touched a lot of times, but wins were also extremely consistent. This is the strategy that doesn't work anymore. For instance quite today I've seen One Touches trading at point blank near the pin at 71/55. But I wouldn't pay 71 in the hope to get back 100, nor gain 55 with the risk of losing 45. For me it's a no trade territory.
When you're selling a strangle at very good prices, you're quite hedged. You can sell it @20+20. You get 40, risk 100 for a touch, 200 for a double touch. But if you do it at >100 , like selling @50+60 or something like this, you completely hedge the risk of a single touch. At the same time, after one touch, in most cases, the risk of a double touch remains virtual: the market can't be in two places at the same time. So if the movement is unidirectionally powerful, you can rest assure for some time (depends on the option), that the double touch will not happen. Depending on how expensive you sold it, and on your view on the market, you can decide to cover the remaining option at the time the touch happens. This will most likely increase the loss a bit, but will shelter you from a mindblowing double touch hit. So in this case, it depends on you how much of the trade is speculation and how much is hedging.
All the strategies where you're not going straight on one direction, but rather have a nondirectional approach, while attempting to exploit pricing (like selling a Strangle) or to exploit theta (like selling a Double Touch...or other complex games) all of them can be called hedging.
I prefer also trading intraday, but not scalping just searching for big directional movements and buy a binary option immediately after I am sure that the movement started. I prefer one hour options as when the price is moving fast it is almost sure it will continue at least a bit further and will not retrace back in the next one hour. I still test in demo, but it works for me with more than 75% success rate!