In this article we explain how binary options traders can take advantage of the buy back option in binary options.Trading binary options is ideal for traders and investors both beginners and experienced. The advantage of trading binary options is in the fact that unlike in forex trading where you have to constantly monitor your risks, binary options offers a simplistic approach to investing in the stocks, currencies, commodities or the indices markets. Simply put, binary options trading offers traders a pre-determined risk even before they enter into a trade. This is highly advantageous and straight forward because it helps traders determine how much they are willing to risk in order to make the 81% profits.
Besides the above factor, there is one another little known feature that most binary options traders are not aware of. When this feature is used in the correct way, binary options traders can further minimize their losses whenever any of the trades they open are reacting the opposite way.
Introducing the buy back option in binary options
The buy back option in binary option comes in many different terms. On a basic level, the buy back option in binary options is nothing but an early closer option. How can you make use of this buy back option in binary options?
The buy back option in binary options is where a binary options trader’s open position during a trade can be closed prior to the scheduled expiry time. So if you opened a trade on the EUR/USD currency pair that expires in 15 minutes and gives you an 81% return and the trade isn’t going too well for you and you are certain that you will end up ‘out of the money’ by making use of the buy back option in binary options, binary options traders can further limit their losses. So if you entered the trade with an investment of $100, binary options traders now don’t have to loose the entire initial investment. As a thumb rule, when you open a trade, the open positions are listed in the “My Open Trades” section, for example in the 24Option binary options trading platform.
The “My open trades” section can be found to the right of the “Trade” window. Binary options traders can click on the asset name to open the trading slip and view the available return for early closure or the buy back option in binary options. Simply click on the close button and the option will expire with this return. In order to effectively utilize the buy back option in binary options the trader needs to understand how the buy back option in binary options works.
How does the buy back option in binary options work
Before we set out to answer this question, there are two basic outcomes that a binary options trader needs to know. Irrespective of the type of binary option selected, there are only two possible outcomes for your trades. In the money, when your trade ends and you profit from it and Out of the money, when it is a losing trade.
One of the key factors to bear in mind here is that there are various market conditions that play a role in determining how much you can minimize your investment risks in binary options trading. Below tables is a cheat sheet to help you understand the ideal factors that will get you the most from using the buy back option in binary options trading. Presently the 24Option binary options platform offers the buy back option in binary options.
In the money close value calculations
The following table shows what scenarios of the open trade will always increase the chances of getting the best value from your buy back option in binary options. The early close value for positions currently “in the money”[table “34” not found /]
Example: If you opened a high/low binary option trade and there is still a good 15 minutes to go before the trade expires and you are sure that while your open trade is presently “in the money” the chances that the trade will close “out of the money” is high in the next 15 minutes, then by making use of the buy back option in binary options, you tend to gain a certain part of your investment instead of losing your entire principle amount invested.
The next table below gives the various combinations that will decrease the value of the buy back option, when you close a trade early before it expires.[table “35” not found /]
Example: If you opened a High/Low type of option with a ‘High’ call and in the event the market price decreases, then by making use of the buy back option strategy, although you will retain some of your principle investment it would be much lesser than 40%. Having said that however, it is always better to get a part of your investment back instead of losing the entire value.
Out of the money close value calculations
The following table shows the scenarios of an open trade that will always increase the changes of getting the best value from your buy back option in the binary options. The early close value for positions currently “out of the money”[table “36” not found /]
Example: If your open trade is presently “out of the money” on your ‘Touch’ binary option and if the market price moves towards the touch value, then binary options traders can gain as high as up to 40% of their initial investment back through making use of the buy back option.
The next table outlines the parameters that decreases the value of your open trade if you intend to make use of the buy back option in binary options.[table “37” not found /]
Example: If your open trade is presently “out of the money” and you are within the expiry time and you have a boundary option selected as ‘In bound’ (or staying within the range) and if you notice that the market price is moving outside of the range, and if you intend to close your trade, it would result in a decreased value.
The above concepts might seem a bit confusing, but let’s put it into perspective.
Assuming that you made an investment of $100 on a EUR/USD pair by making use of a one touch option (touch option where you state that the asset will touch a price of 1.4581), where the current market price is 1.4486 and you still have 15 minutes before the trade is locked, and you notice that the one touch option that you choose is going to certainly drop below the market price, then by making use of the buy back option, binary options traders can close the trade and get back up to 40% of their principle investment.
Buy back option in binary options tips
- The buy back option allows traders to close trades prior to their expiry
- Traders can retain as high as up to 40% of their initial investment on a losing trading
- The buy back option or close position is not available during the initial 5 minutes of opening your trade
- From the no more trades time (x minutes before the expiry time when trading is not allowed)
Buy back option a good trading strategy
The buy back option in binary options can be a powerful tool to further limit your loses, especially during volatile market hours. Instead of losing the entire 100% of your investment through smart trading, binary options traders can make use of the buy back option in binary options and trade the markets better with 24Option.