Pair Binary Options

From binaryoption
Jump to navigation Jump to search
Баннер1
  1. Pair Binary Options: A Beginner's Guide

Pair Binary Options, often referred to simply as "Pair Options," represent a unique and increasingly popular derivative trading instrument within the broader realm of binary options. Unlike traditional binary options which predict the price movement of a single asset (e.g., will the price of EUR/USD be above 1.10 at expiry?), Pair Options focus on the *relative* performance of two assets. This article provides a comprehensive introduction to Pair Binary Options, covering their mechanics, advantages, disadvantages, strategies, risk management, and resources for further learning. It’s designed for beginners with little to no prior experience in financial markets, specifically within the context of the binary options landscape.

What are Pair Binary Options?

At their core, Pair Binary Options allow traders to speculate on which of two chosen assets will outperform the other over a specified period. You aren't predicting whether an asset will go up or down in absolute terms, but rather *which one will rise or fall more* (or less) than the other.

Consider this example: you believe that Google (GOOGL) will outperform Apple (AAPL) over the next hour. You would purchase a “Google vs. Apple” Pair Option with a "higher" outcome. If, at the expiry time, Google’s percentage change in price is greater than Apple’s percentage change, your option pays out. The absolute price levels of either stock are irrelevant; only the *relative difference* in their performance matters.

This differs significantly from standard binary options, which rely on predicting a single asset's direction. Pair Options are inherently hedged against systematic risk – events that affect the entire market – because they focus on the *relationship* between two assets. The payoff is typically fixed, similar to traditional binary options, often around 70-90% of the investment amount for a successful prediction, with the remaining percentage retained as the broker's fee.

How Do Pair Options Work?

The mechanics of trading Pair Binary Options are relatively straightforward:

1. **Asset Selection:** Brokers provide a list of available asset pairs. Common pairings include:

   * Currency Pairs vs. Currency Pairs (e.g., EUR/USD vs. GBP/USD)
   * Stocks vs. Stocks (e.g., Apple vs. Microsoft)
   * Indices vs. Indices (e.g., S&P 500 vs. NASDAQ 100)
   * Commodities vs. Commodities (e.g., Gold vs. Silver)
   * Stocks vs. Indices (e.g. Tesla vs. S&P 500)

2. **Directional Prediction:** You choose whether you believe the first asset will *outperform* (go "higher") or *underperform* (go "lower") the second asset. Some brokers may phrase this as "Asset 1 > Asset 2" or "Asset 1 < Asset 2".

3. **Expiry Time:** You select the expiry time for the option. This can range from minutes to hours, or even days, depending on the broker and the asset pair. Shorter expiry times generally offer higher risk and reward.

4. **Investment Amount:** You specify the amount of money you want to invest in the option.

5. **Outcome:** At the expiry time, the broker calculates the percentage change in price for each asset over the chosen period. If your prediction is correct, you receive the payout. If incorrect, you lose your investment.

The key calculation is the *percentage change* in price, not the absolute price difference. The formula for percentage change is:

((Ending Price - Starting Price) / Starting Price) * 100

Advantages of Trading Pair Binary Options

Pair Binary Options offer several advantages over traditional binary options and other financial instruments:

  • **Reduced Systematic Risk:** As mentioned earlier, Pair Options are less susceptible to broad market movements. If the entire market rises or falls, the relative performance of the two assets is more likely to remain stable, making the outcome less dependent on external factors. This is a major benefit during periods of high market volatility.
  • **Simplified Analysis:** Focusing on the *relationship* between two assets can simplify the analysis process. You don't need to predict the overall market direction, only which asset will perform better. Technical analysis can be applied to identify potential outperformance.
  • **Hedging Opportunities:** Pair Options can be used to hedge existing positions. For example, if you hold a long position in Apple stock, you could purchase a "Apple vs. S&P 500" Pair Option with a "lower" outcome to protect against a broader market downturn.
  • **Potential for Higher Accuracy:** In certain situations, predicting the relative performance of two assets can be easier than predicting the absolute price movement of a single asset. This can lead to higher win rates.
  • **Transparency:** The outcome is based solely on the relative performance of the two assets, making the result clear and unambiguous.

Disadvantages of Trading Pair Binary Options

Despite their advantages, Pair Binary Options also have drawbacks:

  • **Limited Availability:** Pair Options are not as widely available as traditional binary options. Fewer brokers offer them, and the selection of asset pairs may be limited.
  • **Complexity (Relative to Standard Binaries):** While simpler than some trading strategies, understanding the underlying relationship between the two assets requires some degree of financial knowledge. Fundamental analysis may be needed to understand the differing drivers of each asset's price.
  • **Broker Spreads:** Brokers typically charge a spread (the difference between the buying and selling price) on Pair Options, which can reduce potential profits.
  • **Risk of Correlation Changes:** The correlation between two assets can change over time. A previously strong correlation may weaken, leading to unexpected outcomes. Monitoring correlation coefficients is crucial.
  • **Potential for Manipulation:** While less prone to manipulation than single-asset binaries, it’s still possible for market makers to influence the prices of the underlying assets, potentially affecting the outcome.

Strategies for Trading Pair Binary Options

Several strategies can be employed when trading Pair Binary Options:

  • **Trend Following:** Identify assets that are exhibiting strong trends. If one asset is clearly outperforming the other in a consistent trend, consider a Pair Option based on that trend continuing. Utilize moving averages and trendlines to confirm the trend.
  • **Mean Reversion:** If two assets have historically moved together but are currently diverging, consider a Pair Option based on the assumption that they will revert to their mean relationship. This is often used with Bollinger Bands to identify overbought and oversold conditions.
  • **Economic Calendar Events:** Anticipate how economic data releases (e.g., GDP figures, interest rate decisions) will differentially impact the two assets. For example, a strong US jobs report might benefit US stocks more than European stocks.
  • **Sector Rotation:** Identify sectors that are likely to outperform others. Choose asset pairs where one asset belongs to a rising sector and the other to a declining sector.
  • **News-Based Trading:** React to breaking news events that are likely to affect one asset more than the other. For example, a positive earnings report for Apple could lead to outperformance compared to Samsung.
  • **Range Trading:** Identify a range within which the relative performance of the two assets typically fluctuates. Trade Pair Options based on the expectation that the relationship will remain within that range. Relative Strength Index (RSI) can help identify overbought and oversold conditions within the pair's relationship.
  • **Statistical Arbitrage:** This advanced strategy involves identifying temporary mispricings between the two assets based on statistical models. It requires sophisticated tools and knowledge. Pairs trading is a related concept.
  • **Breakout Trading:** Look for situations where the relative performance of the two assets breaks out of a previous trading range.
  • **Volatility-Based Strategies:** Analyze the implied volatility of the two assets. Differences in volatility can create opportunities for Pair Option trading. Using ATR (Average True Range) can help gauge volatility levels.
  • **Correlation Trading:** Based on the historical correlation between the two assets, predict if the correlation will hold or break down.

Risk Management for Pair Binary Options

Effective risk management is crucial for success in Pair Binary Options trading:

  • **Position Sizing:** Never risk more than a small percentage of your trading capital on any single trade (e.g., 1-2%).
  • **Stop-Loss Orders (Where Available):** Some brokers offer the ability to close a Pair Option early, which can limit potential losses.
  • **Diversification:** Don't focus on just one or two asset pairs. Diversify your portfolio to reduce risk.
  • **Avoid Overtrading:** Don't trade just for the sake of trading. Wait for high-probability setups.
  • **Understand the Correlation:** Thoroughly understand the historical correlation between the two assets and be aware of factors that could cause it to change.
  • **Monitor Economic Calendars:** Be aware of upcoming economic data releases that could impact the assets.
  • **Keep Emotions in Check:** Avoid making impulsive decisions based on fear or greed.
  • **Use a Trading Plan:** Develop a well-defined trading plan that outlines your strategies, risk management rules, and trading goals.
  • **Record Keeping:** Maintain a detailed record of your trades, including entry and exit prices, expiry times, and reasons for each trade. This helps with performance analysis and identifying areas for improvement.
  • **Demo Account Practice:** Always practice with a demo account before trading with real money.

Resources for Further Learning


Binary options trading involves substantial risk and is not suitable for all investors. It’s critical to thoroughly understand the risks involved and to only trade with capital you can afford to lose. Always conduct your own research and consider seeking advice from a qualified financial advisor. Remember to choose a reputable and regulated broker.


Trading psychology plays a substantial role in success. Money management is paramount. Risk tolerance should be carefully assessed before engaging in any trading activity. Market analysis is an ongoing process.


Start Trading Now

Sign up at IQ Option (Minimum deposit $10) Open an account at Pocket Option (Minimum deposit $5)

Join Our Community

Subscribe to our Telegram channel @strategybin to receive: ✓ Daily trading signals ✓ Exclusive strategy analysis ✓ Market trend alerts ✓ Educational materials for beginners

File:ExamplePairOptionChart.png
Example Pair Option Chart

Trading platform selection is important.

Broker regulation should be verified.

Expiry time selection impacts risk and reward.

Payout percentage varies between brokers.

Technical indicator analysis is key.

Fundamental analysis provides context.

Financial markets understanding is crucial.

Volatility plays a significant role.

Risk assessment is essential.

Trading plan development is vital.

Баннер