Every experienced trader knows that when it comes to equity markets, many assets move together as pairs. Whether it’s moving up or down, they seem to move together. Even when these pairs move in different directions, they still seem to move together as a mirror image of each other.
Currencies have always been traded as pairs, using one type of currency as a measure against the other’s performance. Today, some binary options brokers are offering pairs for other types of assets.
The first broker to do so was StockPair, and it has proved popular so other brokers are now doing the same.
A binary option featuring a pair of assets involves deciding which of the assets will out-perform the other within a fixed period of time. While standard binary option platforms often feature a short expiry time, sometimes just one hour, pairs binary options trading can offer a time period of months.
Binary options that feature pairs have two varieties: fixed and floating.
Fixed Pair
When a trader is dealing with a fixed pair binary option, it is based on which of the two assets involved will perform better from the moment of the purchase until the expiry time. There is a fixed expiry time and a fixed pay out.
It is worth noting that typically traders have had to wait until the expiry time in order to collect their payout, but there are now brokers which are allowing for flexible expiry times on fixed pair options.
Floating Pair
The principle difference between a fixed pair option and a floating pair option is in the starting point, or the beginning of the period where the asset pair is compared and the difference is calculated.
In a floating pair, the starting point is not fixed at the moment the option is taken. Instead, the trader chooses a given starting point. Most trades of this variety occur after the comparison of the pair of assets has already begun.
Advantages
There can be many advantages to pair options trading including:
Since traders are choosing which of two assets will do better than the other during a set period of time, it is possible to finish in the money even if they both do poorly, as long as you have chosen least unsuccessful option in the pair.
Since traders are choosing which of two assets will do better than the other during a set period of time, it is possible to finish in the money even if they both do poorly, as long as you have chosen least unsuccessful option in the pair.
Traders may be able to use long term trends to their advantage. For example, when stocks are high, many investors sell precious metal assets to free up cash to buy more stocks. A clever binary options trader can benefit from the mirroring trend in two different assets to benefit from these kinds of trends without worrying about daily price changes.
Traders can also use upcoming business news to their advantage. For example, if a technology company releases a popular new application or product, that company can be expected to out-perform its competitors for a period of time.
Floating pair binary options can always be cashed in, and now some brokers are allowing the same flexibility with fixed pair options. With most binary options trades, you still have to wait for the expiry time to hit before you can cash in.
Pair binary options allow for longer option periods, in addition to the short periods that are standard in binary options trading.
Summary
Many traders are finding that binary options asset pairs are offering them a greater variety than just single assets. Traders who are up to speed on market trends and analytical methods can find large profits in trading pairs. Binary options asset pairs offer traders more choice, more variety and more chances to profit from their hard-earned study of the international market and its trends.
