Risk Management Tool For Binary Options Traders
Risk management comes in many forms. One way is to use the early out, close now and rollover features that are available with many of today’s binary options brokers. These features allow you to take advantage of profitable opportunities and cut losses in the event a trade turns against you. As good as they are however, there are some limitations including the fact that not all brokers support these tools, and the ones that do will probably not let you use them indiscriminately. Regardless, they are good tools and ones you should be familiar with.
Early Out and Close Now are basically the same thing. They let you close a position early, before expiry, and take a smaller profit or a smaller loss depending on what is showing. Assuming a position is in the money and theoretically profitable you can sell it and take some profit but it will not be as much as if you held the option until expiry. The benefit is that it allows you to close a trade that may otherwise move out of the money before expiration. The risk is that you close too early and miss out on profits you would have otherwise realized.
The problem with this feature is twofold. The first is that not all options have this feature. What I mean is, usually only longer term options such as 30 minutes, 1 hour or end of day will have an early out feature. Shorter term options like 60 seconds or even as much as 5 minutes will usually be excluded. The other problem is that there will always be a window of opportunity; you won’t just be able to open and close a position, and you won’t be able to close it once it enters a certain window leading up to expiration. Using one hour expiry as an example the window might 50 minutes, that is, there is a 5 minute black out period immediately after the option is opened and the last 5 minutes before expiry. The first black out period is not an issue usually but the second one can be, especially if you wait to long to close and then lose out in the last 5 minutes.
The Rollover, sometimes called Extend or something like that, is a feature that allows you to add more time to a trade. At first this may not sound too exiting but in terms of your trading it could mean the difference between taking a loss and taking a profit. If your trade is already in the money and showing a profit there really isn’t a reason to add time to it. On the flipside, if your trade is not in the money but you think it will be adding a little time could be just what you need to ensure a profitable return. After all, choosing expiry is one of the toughest aspects of trading binary; it’s easy to pick which way a market will go but it is very hard to say precisely when it will move there.
Again, this feature does come with some caveats. The first is that it will cost you some more money in order to do this. It only makes sense, right? The original trade was for $X at X amount of time, if you add another X amount of time it will cost you some more money. The good news is that the payout will grow as well. The second is that you can’t just keep rolling over a trade until it wins. Theoretically you could of course, but the broker won’t let you. For the most part you will be allowed to do it only once per trade.
Where You Can Find Early Out And Rollover Trading Features
Now, which brokers have such features? The most prevalent platform to support Early Out and Rollover is the SpotOption platform, which also happens to be the most prolific in terms of brokers. This is a good thing because it mean there is a very good chance of finding a respectable broker that is regulated and licensed for your country. AnyOption is a proprietary platform and broker that also has Rollover and Take Profit features. It is EU, CySEC and South Africa regulated and one of the top trusted brokers around. Another, TechFinancials the parent of 24Option, only has early closure but it is available on a much wider range of options and expiry than what you find other places.