What is binary options binary options, also known as short-term foreign exchange contract trading, also known as digital options and fixed income options, is one of the simplest and most popular financial transactions. At present, there are the lowest 5 yuan binary options, binary options with a price of 100 yuan, and the currencies of US dollars and euros can be used as the basic currencies for transactions.

The Development History of binary options

In 2008, options clearing companies began to offer binary options trading to more investors through over-the-counter trading, then American Stock Exchange (AMEX) and Chicago Board Options Exchange (CBOE) were launched one after another, and soon binary options trading was developed to online trading, making it easy and convenient for individual investors to trade. It can be seen that the United States was the first to recognize the legitimacy of binary options. The above content comes from Baidu Encyclopedia.

The definition of hedging in binary options trading "Hedge" means hedging and hedging. Hedging transaction is simply a capital preservation transaction. Hedging transaction is to conduct two market-related transactions at the same time, in opposite directions, with the same amount, and break even.

Market correlation refers to the identity of market supply and demand that affects the prices of two commodities; If the relationship between supply and demand changes, it will affect the prices of two commodities at the same time, and the prices will change in the same direction.

The opposite direction means that the buying and selling directions of two transactions are opposite, so that no matter which direction the price changes, there is always a profit and a loss. Of course, in order to protect the capital, the number of two transactions must be determined according to the range of their respective price changes, so that the number is roughly the same.

Hedging is rarely used in the stock market, but it is widely used in futures trading and binary options trading. This is related to the different rules of the stock market, options and futures trading systems.

Hedging transactions in binary options are two transactions related to the market, with opposite directions, the same amount and breakeven. Market correlation refers to the identity of market supply and demand that affects the prices of two commodities. If the relationship between supply and demand changes, it will affect the prices of two commodities at the same time, and the prices will change in the same direction. The opposite direction means that the buying and selling directions of two transactions are opposite, so that no matter which direction the price changes, there is always a profit and a loss. Of course, in order to protect the capital, the number of two transactions must be determined according to the range of their respective price changes, so that the number is roughly the same.

In the market economy, there are many kinds of transactions that can be hedged, such as foreign exchange hedging and binary options hedging, but the most suitable transactions are binary options and futures.

Binary options Hedging Example

For example, after one month, I will have 100 pounds of foreign exchange to start with, but after one month, I am not sure whether the pound will fall, so I sold 100 pounds after one month in the financial market to preserve the value. This is foreign exchange hedging. I can also make a long-term option on binary options until next month, and make a reverse order on this long-term binary options.

How to hedge transactions between binary options and the foreign exchange market? Hedging in foreign exchange market.

Hedging is the most common in the foreign exchange market, aiming at avoiding the risk hedging of one-way transactions. The so-called single-line trading means buying short positions (or short positions) when you are optimistic about a certain currency, and selling short positions (short positions) when you are bearish on a certain currency.

If the judgment is correct, the profit will naturally be more; But if the judgment is wrong, the loss will be greater than hedging. The so-called hedging is to buy a foreign currency at the same time and short it. Besides, we should also sell another currency, that is, short selling. In theory, shorting a currency and shorting a currency should be the same as the silver code, which is the real hedging, otherwise the hedging function cannot be realized if the two sides are different in size.

This is because the world foreign exchange market is based on US dollars. All foreign currencies rise and fall with the US dollar as the relative exchange rate. A strong dollar means a weak foreign currency; If the foreign currency is strong, the dollar will be weak. The rise and fall of the dollar affects the rise and fall of all foreign currencies. Therefore, if you are optimistic about a currency, but want to reduce the risk, you need to sell a bearish currency at the same time. Buy strong currency and sell weak currency. If the estimate is correct, the dollar will weaken and the strong currency bought will rise. Even if the estimate is wrong and the dollar is strong, the currency bought will not fall too much. The weak currency sold has fallen sharply, with less losses and more gains, and it can still be profitable on the whole.

In fact, most foreign exchange traders use the hedging function only because they are in the wrong direction, but they are reluctant to give up their stop loss, so they make a reverse order, which is the so-called "lock order". The advantage of locking orders is that the losses are basically controlled and will not expand. Of course, because you open more positions at this time, the interest and commission paid will also increase. However, just like the popular saying-unlocking is easier than unlocking! Unlocking is really a difficult thing, but it is better to get rid of the repeated market shocks. If there is unilateral ups and downs, it will greatly increase the difficulty of unlocking.

Two. Precautions for hedging in foreign exchange market

1, you can't forget the stop loss because of hedging.

In the final analysis, stop loss is the king to correct the wrong transaction. Only when you do the right thing, but the timing of entering the market is not good, Youyou suggests that you make a temporary treatment by hedging. In this way, you can not only ensure the security of your account, but also profit from the hedged list. However, if you find yourself misjudging the general trend, you must stop rather than hedge. Even if I didn't think there was anything wrong with the megatrend before, I just didn't grasp the opportunity to enter the market and hedged it. Once I found that the megatrend was still wrong, I couldn't hesitate at this time. I must close my position immediately and keep the list in the right trend.

2. Hedge early.

It is right to find the megatrend, but the timing of intervention is not good. It is necessary to hedge immediately. Don't wait until the opening loss is big, which will weaken the hedging function and make it more difficult to unlock it in the future. In other words, if you choose to use the hedging function, you should take the initiative to use it, and only remember it when you are passive, and then use it, I am afraid things will be more complicated.

3. When hedging, it is best to hedge at 100%, that is, completely lock. If you buy too much 1 hand, don't hedge 0. 1 hand just because the account is a little ugly. If you take the initiative to hedge, you must make money from the hedging order. Why do you only place so few orders? On the contrary, the account is safer and the profit of the hedging order will be more.

For most traders, it is a carefree suggestion to reduce the transaction scale. Overweight positions are a common problem for most traders. High position and large order hedging will sharply increase the transaction cost of the account and make the remaining margin ratio too small, which will make it difficult to unlock it in the future.

5. Don't take hedging as a routine means. Only when the general trend is right and the timing of intervention is not good can it be used. Moreover, it can only be used if and only in this case.

How to Hedge in binary options We have introduced the ways of foreign exchange hedging in detail above, so it is meaningful, and so is the hedging transaction in binary options. Let's talk about it briefly:

Binary options is one of the simplest and most popular financial transactions. There are only two possible outcomes when binary options expires. According to whether the closing price of the underlying assets is lower or higher than the strike price within a specific time (such as the next hour, day, week, etc.), whether to make a profit or not is determined. ). In other words, a financial trading product that can be operated as long as it is judged to be ups and downs, then as long as it is purchased in reverse, it should be enough to offset.

Hedging of other trading assets, such as stock trading and fund futures, are all types of trading hedging, but what kind of hedging can binary options achieve?