The term hedge fund is familiar to many investors — as high-risk investment vehicles. Here exactly is the opposite behind. The English term «to hedge» means secure. A hedge fund secures its investment positions from intern. And just as is covered here, investors can hedge with binary options. This strategy uses both for investors, who moved to the Forex trade, as well as for the pure stock portfolio. How does the protection of another asset class through the binary options profit?
1.) What can «hedge» under be understood?
The word «hedge» comes from English and can with «secure» or translated «fence». In the financial sector describes «hedging» techniques that serve to limit the risk of securities, currency and commodity transactions. The risks of a business with the chances of another business are combined Simply put here. When hedging the traders tried to find an offset to the actual trade. In the case of binary options, it sets up again that the trend is rising and once that sinks the trend. Assuming the simplest case, but this also means simultaneously that the trader can indeed enter no losses, but no return, because one of the two positions will always lose and money is lost, which must be compensated. However, especially in the world of finance, the cases are rarely simple. There is loss protection and in the case of profits over 200% strength returns. The experienced trader knows his money in a way that the risk is minimal and the profit is maximized. In England there since 19.12.2003 the Investment Modernization Act. Thereafter, corporations can distribute their products through said hedge fund which must be represented, however, by the BaFin (Bundesanstalt für Finanzdienstleistungsaufsicht) approved. To be about to be clear to what extent counter investments held to compensate for an existing or arising risks may use financial market players the so-called hedge ratio. This can be considered as a measure to balance risk and opportunity and fair.
Conclusion: Under the hedging hedging investments should be understood against risks.These risks may be foreseeable and known to be factored in the sense of loss protection in equity transactions or from the outset within the meaning of Conversely positioned trades.
2.) The share prices fall — So what?
Suppose an investor holds in his custody shares which he does not want to sell, but give the course. The trend is clear, the stock market is not only in the short term, but several days at a time after. This temporary price decline, the share owners use to put in a binary option up on this stock and a falling rate.
The trend is stable and the trader earns the falling prices of its shares. If the trend over several days for him, the losses in high yield can trade contribute several hundred percent profit. He could realize in some cases even through the sale of shares in a loss, but theoretically compensate for this by the Option Trade. The hedge ratio would indicate here the amount that must be applied when trading binary options to compensate for the loss in the Stock Market.
Conclusion: If a negative trend in the equities business foreseeable, offers hedging by Binary options. These can be set to the opposite trend and thereby realize gains despite losses. A similar principle applies when hedging by Binary options in forex trading.
3.) Hedge Binary Options Binary Options
With binary options, the hedge less complex because here is set not to certain values, but on trends. Binary options are charged with rising and falling prices — which is now known. The High Yield trading (eg with One Touch Options ) will pay more than 100 percent on capital employed. This is for the following scenario Prerequisite: An investor sets with a broker on a rising EUR / USD exchange rate 100 euros with a One Touch High Yield Option with 350% yield. (Has also high-yield options available!) In another broker it is also 100 euros on EUR / USD, but at a decreasing rate. If enough volatility in the market is to meet the One-Touch-Level at least one option, he will definitely win 350 euros. On the other hand it is, however, losing 100 euros. This 100 euros he is but imperfection, nevertheless it remains a net profit of 250 euros. This strategy entails but also the risk of losing 200 euros if no one-touch level is reached. So Caution: apply only in markets with sufficient volatility and risk-tolerant. The advantage over a hedged Forex Trade is that he has to pay any fees to the broker. Opening an account is free, so there’s no reason to maintain a trading account with two brokers. There should be the minimum deposit disbursements and other payment terms are researched in advance. Otherwise, the best hedging is fee payments neutralized.
Conclusion: In the trading with binary options, the hedging urges formally, since there are only two possibilities for development here. Solely to be used brokers are to take in advance a closer look.
4.) Binary options can convince
These examples show that binary options can score as providing security trading strategy. Even if only a fraction of the actual traded volume must be actually used in forex trading, the initial values are binary options again significantly lower. Due to the extremely high yields of profit leverage on capital employed is higher than average.However Binary options brokers are partially secure less professional than traditional online brokers. Also, the financial instrument of the binary option itself offers only a limited flexibility because the potential returns on off-exchange Binary Options platforms are fixed generally. Some brokers offer traders a loss protection. In principle, these between 5 to 15% of the capital invested. This is also one of the points that have to be clarified in advance, since it is also possible in principle more than losing the capital invested.
Conclusion: Binary options offer traders high returns and possibly loss protection up to 15%.