Although ladder options were only recently introduced to the binary options trading community, the concept has been around for a while as it is often used as a trading strategy by forex traders to maximize their profit from riding a trend to its fullest potential.
The Stern Options trading platform gives you the ability to trade commodities, currencies, stocks, and market indices using the binary options ladder strategy. The fact is, ladder options are just like classic CALL/PUT options except that instead of making a single prediction per trade you can make several predictions simultaneously corresponding to the price levels shown on the chart for the same expiry period. Because the different price levels shown on the chart look like steps on a ladder, this is how the ladder option got its name.
Strategizing the Binary Options Ladder
The Ladder is actually very simple, although at first sight the interface might seem a bit more confusing than that used for classic Binary Options trading. Don’t worry! The Ladder interface is customized to offer you advanced choices unavailable elsewhere. With this unique method, you can focus on a specific underlying asset and expiry time and also make a series of predictions about the price movement of the underlying asset.
To make things clearer, let’s review the chart above. The graph of peaks and troughs in the center of the interface shows the current price of the GBP/USD and its movements in real time, as usual. On the right, you can see 5 different strike prices corresponding to the 5 equally spaced dotted lines which form the ladder. The trader is asked to make the same prediction five times: whether the price of the underlying asset will be above or below each one of the strike prices by the time of expiry.
Let’s say the price of the GBP/USD has been ranging around the middle price level for quite a while. You feel that a pending news release will cause the price of the GBP/USD to rise above the second highest price but not enough to breach the highest price level within the next 30 minutes. In order to maximize your returns for this trade you will make 4 predictions stating that the price will end up above the lower 4 price levels, and 1 prediction that the price will end up below the highest price level.
However before actually committing to your trade, you should check the payout percentages and see if it is worthwhile to commit your money for each individual price level. The best strategy would be to trade only those price levels which are relevant to your market analysis.
The Payout on the Ladder Option
The payout percentages in the example shown above are between 307.41% and 1067.21%, and therefore this is really worthwhile doing. The payout of the Ladder Option is related to your predictions, and it is an occasion to profit even more than usual from a single trade. The Ladder Option is extremely useful during conditions of high market volatility – the greater the price movement, the more valuable your actual predictions are for each price level. In fact, the return from each trade is correlated specifically with the volatility and risk of the operation. As an additional benefit, if for some reason you want to get out of the trade early, you can sell the ladder option for a price that is clearly displayed by the interface, up to 5 minutes before the expiry. After that time, the trade is considered final.
Trading ladder options can be rewarding as it allows you to:
• Earn more than what is possible from trading classic binaries.
• Make several predictions on a single trade.
• Simplify the application of the ladder trading strategy for binary option.
• Trade markets with high volatility.
As mentioned earlier, there are 5 different price levels shown on the chart. For each price level, the trader decides if the price will end up above or below the price level by the time the option expires. In essence, it is just like trading a classic binary option except that you have to make five predictions instead of one.