Hedging a Binary Option. Binary options are an interesting way to speculate on the markets. The idea that they pay all or nothing, regardless of how far the price moves, makes it easier to understand, but also more akin to gambling on the outcome, in this case the price at expiration. But what some don't realise is that you can also use binary options for hedging as well as speculation. In fact, some sharp traders use binary options for hedging profitable forex positions and for extending profitability in the case of small pullbacks. Hedging in this instance means using binary options in such a way that you come up with a way to lose only slightly while being open to higher gains. Binary options have a strike price and expiration period, which may be as little as a few minutes or hours. If the price is above the strike price at expiration, a binary call option pays out the set amount a put option would pay nothing. If the actual price is below the strike price at expiration, the bi...
5 Online Options Trading Firms That Please Investors. Options are like the prettiest girl in school -- you're afraid of her but, naturally, you're very drawn to her. So it is with options. They're different from most investment tools. The instrument is far more complicated than a stock. Education is crucial. And your demands of an online options broker will be different than those of a straight stock-trading platform. The results from IBD's Best Online Brokers survey show five online options brokers that investors believe meet their special demands. These results are a bit surprising. You won't find the biggest names here, although some of the winners have been acquired by the big guys. The five winners: Thinkorswim, OptionsXpress, OptionsHouse, TradeStation and Interactive Brokers. Is it possible that the complex, high-risk nature of options attracts a specific breed of investor? "Absolutely," said Michael Burke, vice president of client training at Trade...