Technical Analysis tradinglounge.com.au Technical Analysis Global Market Drivers – the Day Ahead -12th March 2012 TradingLounge Peter Mathers Technical Analyst
Archive for February, 2013
Hedging Binary Options
This strategy benefits you mostly when you have two options with a range of expiry, where both options could be in the-money. Then you are able to minimize your risk but also maximize your gain.
This option is popular in forex binary options, in which the value of the currency can change very quickly in either direction. In this scenario, hedging could be a viable option for reducing risk to the trader.
Take the following scenario of a forex binary option based on the price of the Euro. The Euro has been rising and is predicted to continue to rise at a determined breakout point. At this point you would place a call, expecting the Euro to rise. But what if the price changes quickly and falls? You can place a put option at another point, helping you to minimize risk in the event that the price indeed falls.
In the above scenario, you have placed a call for $ 500 at the option price of 5.1. You have also placed a put for $ 500 at the option price of 5.3.
The following outcomes could occur:
* The Euro price could expire at 5.1 exactly, making your call option at-the-money. You would receive $ 500 in return of your initial investment. In this case your put option would be in-the-money, and you would receive $ 850 on your initial investment. Total investment= $ 1000. Profit= $ 350. This trade would end up being a net gain. (-500 + 500 + -500 + 850) Currency Hedging With Options
* The Euro price could expire between 5.1 and 5.3, making both your put option and your call option in-the-money. You would receive $ 850 for both trades. Total investment= $ 1000. Profit= $ 700. (-500 + 850 + -500 + 850) This trade would end up being a net gain.
* The Euro price could expire below 5.1, making your call option out-of-the-money. You would receive $ 75 in return of your initial investment. In this case your put option would be in-the-money, and you would receive $ 850 on your initial investment. Total investment= $ 1000. Profit= – $ 75. (-500 + 75 + -500 + 850) This trade would end up being a net loss, but you still lose much less than you stand to gain in other scenarios.
* The Euro price could expire above 5.3, making your call option at-the-money, and you would receive $ 850 in return of your initial investment. In this case your put option would be out-of-the-money, and you would receive $ 75 in return of your initial investment. Total investment- $ 1000. Profit= -$ 75. (-500 + 850 + -500 + 75) This trade would end up being a net loss, but you still lose much less than you stand to gain in other scenarios.
* The Euro price could expire at 5.3 exactly, making your put option at-the-money. You would receive $ 500 in return of your initial investment. In this case your put option would be in-the-money, and you would receive $ 850 on your initial investment. Total investment= $ 1000. Profit= $ 350. (-500 + 850 + -500 + 500) This trade would end up being a net gain.
* In each scenario, you stand a chance of winning a greater profit by hedging, or placing two bets in opposite directions, than the all-or-nothing chances of one binary bet. In the instances in which you stand you lose money, you lose far less than the possibility you have to gain a greater profit than loss in other circumstances.
Currency exchange rates: A necessity
In the language of finance between two currencies of different countries, the rate at which it will be exchanged for the other is called as “currency exchange rates”. These rates can be easily calculated with an exchange rates calculator. Basically, an exchange rate tells you the value of a currency in terms of another currency. With an exchange rate calculator you can easily tell how much units of a currency is equal to one unit in another currency. This will tell you which of the currencies is stronger that is, which of the two economies is stronger. The pound has the highest currency exchange rate against any other currency.
There are a lot of situations in which people may need to exchange currencies from one another, like, if a person is getting paid in a foreign currency, buying something from another country, or simply ordering something on the internet, etc.
In these situations the person can easily take help from the exchange rate calculator available on the internet. If a person is planning to travel to a foreign country, he will need money to spend there. So, he can go to a local money changer and get the foreign currency of his desire with the help of an exchange rate calculator. The person may also buy traveler’s check or maybe a traveler’s card but most of the people going abroad take with them some foreign currency so that they don’t face any problems. The current exchange rate for any of the currencies can be found out online with the help of Exchange Rate Calculators. All you need to do is enter a desired amount to be converted and indicate the currency of your choice. It is as simple as that!
In the retail exchange markets, money dealers will quote a different buying and selling rate. The buying rate is at which the currency will be bought and the selling rate is at which the currency will be sold. The quoted rates are such that will incorporate a dealer’s margin, his profit, in the exchange rate or else the profit may be recovered in the form of a commission in some other way.
Best Exchange Rate
One problem common to people to exchange currency is money-related problems. They often worry about how to save money, how they could get the best deals with the amount of money they have, how to keep their money safe, and other things concerning money. Of course, it also follows that individuals and businesses also want to get the best exchange rate so they could get the best from their money’s worth. To help with this, a tip on how to get the best exchange rate will be presented below.
You can research about the best exchange rates offered by banks, airports, and credit card or debit card services. It is also best to consider exchanging your money with Currencychange.eu since they are most recommended by a number of individuals and businesses worldwide for their competitive exchange rates. Currency Change already established their name in terms of providing their clients with the best exchange rates and expert service.
Exchanging money with Currency Change is as easy as 1, 2, 3. All you have to do is follow these procedures:
1. REGISTER: Visit www.currencychange.eu and click the “open an account” icon on the sidebar. Doing so will officially register you with their service. Take note that opening an account or registering is free of charge. If sending an email is a better option for you, you could simply send them an email via email@example.com You could also register by calling them on +44 (0)20 7373 2686.
2. GET A QUOTE: To get the best exchange rates, you could opt to get a quote of the best rates first before exchanging your money. Just click the “get a free quote” icon on the sidebar of their site and wait for the reply of their dealer. After receiving the quote, you have the option to continue the transaction or not. It is likely that you will confirm the transaction because Currency Change gives the best exchange rates all the time.
3. MONEY TRANSFER: It must be noted that Currency Change does not accept cash or cheques, so what you have to do upon confirming the transaction is send your money through your bank. Upon receiving your money, they will immediately exchange your money with the currency you ordered and send the exchanged money back to your bank. They accept transactions with banks worldwide, so there won’t really be hassles wherever you are in the world.
Currency Change is definitely the perfect choice if you want to get the best value for your money and if you want an assurance that the transaction would be safe and efficient. For more information, visit www.currencychange.eu