BINARY FENCE TRADING

Fence trading gives traders the opportunity to win no matter what direction an option moves.

Trading Example :

You believe that the price of Gold will go up in the next hour. Trading on a Above / Below binary option, you decide to buy a Call option at a strike price of 1120. The market goes up as you expected and the price of Gold is currently at 1160. However, after a few minutes you start to think that the price of Gold is going to go back down. In order to cover both outcomes, you buy a second option, on Put, at the current rate of 1160. This way if Gold expires with a price between 1120 and 1160, you will win both of the options.

Scenario 1:
If you had invested $1,000 on Call and $1,000 on Put (Total: $2000), you would receive up to $3,600 (with an 80% payout), realizing a $1,600 profit ($1,600 = $3,600 less $2,000 of the investment).

Scenario 2:
You can also win one contract and loose the other, cutting their losses. For example, if Gold expired higher than 1160 than you would win the “Call” and loose the “Put”. On the other hand, if Gold expires lower than 1120, you will win the “Put” and loose the “Call”.

Scenario 3:
In the worst case scenario, you will have invested $2,000 and get only $1,800, loosing $200 (10% of their initial investment).

Scenario	“Call” Payout	“Put” Payout	Total Payout	P&L
SET above 1160	$1,800	-	$1,850	-$200
SET between 1120 and 1160	$1,800	$1,800	$3,600	$1,600
SET below 1120	-	$1,750	$1,850	-$200

Using this strategy, a trader can trade up to eight times and be out-of-the-money seven times and still cover their losses and make a profit from one win.

7 X ($200) + 1 * 1,600 = $200