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EUR/USD HEADING DOWN – HOW TO HEDGE RISK ?

WELLS FARGO 58.345 17:30 22.02
OIL-APR17 (BRENT) 55.785 17:30 22.02
TOYOTA (US) 114.260 17:30 22.02
COLGATE-PALMOLIVE 73.085 17:30 22.02
FERRARI 65.855 17:30 22.02
TSX 60 936.300 17:30 22.02
NZD/CAD 0.94522 17:30 22.02
ALIBABA 104.995 17:30 22.02
BOEING 175.425 17:30 22.02
PFIZER 33.705 17:30 22.02
AUD/USD 0.76870 17:30 22.02
AUD/JPY 87.211 17:30 22.02
GBP/USD 1.24415 17:30 22.02
EUR/USD 1.05560 17:30 22.02
GENERAL ELECTRIC 30.305 17:30 22.02
S&P 500 2362.140 17:30 22.02
JP MORGAN CHASE 90.965 17:30 22.02
METRO AG 29.860 17:30 22.02
SILVER 17.993 17:30 22.02
AIG 64.085 17:30 22.02
GOLD VS OIL 22.1128 17:30 22.02
OIL-MAR17(WTI CRUDE) 53.980 17:30 22.02
USD/CAD 1.31958 17:30 22.02
FTSE MIB F-MAR17 18867.500 17:30 22.02
GOLD 1233.564 17:30 22.02
DOW 20760.31 17:30 22.02
TELEFONICA 9.354 17:30 22.02
AUD/CAD 1.01435 17:30 22.02
DOLLAR INDEX-MAR17 101.390 17:30 22.02
3M 185.110 17:30 22.02
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By: Adam Stone
May 12th 2014 6:10am GMT, London UK
 

Binary options trading this week will being with quite a bit of volatility as has been the case for most of the last 12 days. The choppy US trading session was much like it has been over this last period and it’s likely to continue in the coming trading session. The S&P just barely eked out a day in the black this past Friday and the possibility of some positive back wind could be in store for us today but there’s lots to get through before such a prognosis could turn into seriously bad a miserable day by the end. It’s all about the volatility which has been the center-point of all the trading behavior of late.

But in the forex market, things have been both volatile and yet directional bound. The trend of the EUR/USD has been fast and furious with the current rate hovering near 1.3758 . Binary options traders will probably keep an eye on the support level at 1.3740 which looks incredibly vulnerable. A break below the level will have serious follow through and should allow both binary and forex traders to get in on the action. The fact is, down options look very solid if the break does in fact occur and the ability to take advantage of straight up forex contracts now makes doing this much less risky. After all, the ability to just take a down option on a break below the support level with binary options is a fairly low risk affair. But couple this action with a BUY of the EUR/USD with the forex platform as soon as the break occurs and you now have a hedged trade.

EURUSD with binary options 12-5-2014

Depending on the time frame of your original binary trade, this type of hedge will have varying results. For starters, the longer the time period, the more valuable this hedge becomes. So doing this with, say, a 60 second trade, will likely result in little to know hedge based gains. However, make the trade for a 60 minute or even end of day of option, and you’ve got yourself a major winner.

Trade the forex pairs (now including Gold, Oil, Apple, and the DAX Future) on the forex platform so you can take advantage of this hedge capability. On days with high volatility this should come in very handy as the up and dow moves can be very sudden. We do admit that thus far the day of trading has been rather muted though. We expected more tumult and got much timid. However, don’t be fooled by lulls in the price action, it can all get rather wild in seconds flat. With no particular trading or economic news slated for the day ahead, be prepared to hedge your trades as the volatility indices head higher and the forex pairs re-gauge their efforts to the down side, our preference for direction into this coming break.

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Adam Stone
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Adam Stone

As COO of GOptions, my first and foremost goal is to provide traders with the most up to date info from the markets. I have been trading the markets since 2004 and have been involved with stocks, binary options, and forex trading since then. I have had no formal market education and pride myself on a self taught approach to everything related to trading. I try to focus though on both the technical and fundamental aspects related to each trading day and bring forward the most important aspects of risk/reward in the market.
Adam Stone
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