When you connect commodities and stocks, magic can happen. That is just what this digital options strategy aims to do in an effort to provide traders with big profits. You will need at least a little trading experience in order to execute this strategy correctly. Beginners, go ahead and pay attention to this one, as you will be able to use it shortly. Just get a few weeks of trading under your belt first.
This strategy is quite similar to the pair options strategy in which you connect related assets and make trades based upon how the price action of one effects the other. Here, you will be trading commodities and then hedging those trades by entering into stock trades, based upon how one impacts the other. One example would be the commodity crude-oil and then a stock such as Exxon. If oil prices climb drastically, you’d likely see a decrease in the value of Exxon stock. Such information can provide you with dual profits.
Using that example, you’d enter into a Call position for the increasing price of crude-oil and then a Put position for the decreasing price of Exxon stock. With this type of action, you lower risks, while increasing your odds of earning money. Even better, you may be able to enter into multiple trades using the same forecast, generating multiple in the money finishes. Brokers digital options offers three different super-short expiry times for those who desire short expiry times for fast trading.
The risk level will increase if you do not know your assets well, which is why this strategy is not recommended for new traders. The more familiar you are with commodities and stocks, the better you’ll be able to recognize key connections that can lead you to profit. Solid analysis is required, and it will need to be completed for both assets. This will increase your time commitment, but every shot at double, triple, or even quadruple profits will certainly make it worth the effort.
Many digital options strategies are geared towards both earning profits and limiting risk. This is yet another strategy that works to accomplish both. If you are able to connect assets correctly and recognize just how the price movement of one will impact the other, you’re all set. Add in one or two reliable technical analysis tools to this strategy in order to render it even more effective.