Trading SpotOption’s Ladder Options Contract
Ever since the introduction of the ladder options contract by SpotOption in its new Gen 2 platform, there has been a lot of hype about this new options contract. Most binary options traders are actually clueless as to why there is so much hype over this new type of options contract especially by the more experienced traders who are familiar with spot forex trading.
The main reason is the ladder options trading strategy is one of the more frequently employed trading strategies by forex traders. Essentially, it gives the trader more control over the outcome of his trade. Presently, only the SpotOption platform features the ladder options contract. However, we suspect it won’t be too long that other binary platform provider will start to follow suit and introduce this new option contract into their own platform.
What is Ladder Options Trading?
As mentioned earlier, it is a trading strategy often used by spot forex traders in conjunction with vanilla options. The trading strategy basically derived its name from how the trading strategy is implemented. It involves a range of prices which are arranged in a series of levels much like rungs on a ladder.
The key thing about the ladder option is that it let you predict if the price of the underlying asset will rise or fall the price “rungs” while your trade is active. The implication of this is that you can maximize your profit level depending on how strong the price trend is. In other words, squeeze more ‘juice” out of the trend. And if the trend is strong enough it can breach levels where the returns are the highest.
In the diagram above, if the price for the AUD/JPY rises to the highest level at 84.480, your payout ratio would have been 906.88%. In money terms, for every $100 that you invested, you will get a return of $1006.88! It should be noted that your payout is not limited to just one price level. Had you selected multiple price levels and the asset price breaches all the levels, your payout will be the cumulative payout of all the price levels selected. Using the example above, if you invested $100 for each of the price rungs as shown in the diagram above, your aggregate payout would had been a total of $3762.25 ($459.84 + $632.58 + $771.41 + $891.79 + $1006.88) for a $500 investment. With this kind of returns, it is easy to see why some binary traders are so excited about ladder options.