Options trading can be extremely risky during the event of major economic news releases. The market tends to exhibit a high level of volatility after the news release which creates extremely difficult trading opportunity. At that time binary options brokers tend to give extreme payout structure compared to the normal times. Many rockier traders step in this trap and lose their hard earned money within a fraction of a minute simply by trading the extreme volatile condition. On the contrary trained option traders are making a consistent profit during the extreme volatile condition simply by using the retracement ratio of the price.
Let’s see how the professional options traders trade the extremely volatile conditions of the market.
In the above figure, the big blue candle represents 800+ pips drops within 1 hour in the GBPUSD pair. Though this type scenario is very rare in the options market but some the expert option traders makes a huge amount of money simply by using the retracement ratio. In the above figure, the price retraces back near about 500+ pips after the 800+ pips drops. Unlike the novice traders, professional options traders wait patiently for the long bearish candle closing. Experts consider the closing price of the long bearish candle as a temporary support zone. Traders wait cautiously for two candles two see if the temporary support holds or not. If the support holds then the traders execute their call option at the third candle option.
The second entry is much more reliable in this trading strategy. In the eyes of many expert professionals, options traders’ 50 % retracement of the long bearish move is considered to be the most profitable options trading area. Like the first setup, traders wait patiently to see if the 50 % retracement level can hold the bearish move of the price. If the price manages to stay above the 50% retracement level for two consecutive candles then traders go for call option in the market. These type trading strategy works best when the average hourly movement of the currency pairs exceeds 200 pips. Though the system is extremely reliable and profitable but traders are advised not to use this trading strategy unless you truly master the art of volatile environment trading. As a professional options trader, you must limit your risk while trading the major economic news releases in the market. The key to success in the options trading industry is to follow strict money management plan. In the eyes of many expert option traders, proper money management is the Holy Grail in this financial industry.