A Binary Way To Play The British Pound
- After peaking in 2007, the British Pound fell almost 30 percent versus the U.S. Dollar in less than two years.
- However, the currency recuperated some of its value after the big tumble and has been range-bound, between 1.445 USD and 1.72 USD.
- Over 2015, the Pound lost roughly 4.4 percent of its value.
The GBP/USD currency pair has been volatile. In 2015, the Pound's value moved up and down, range-bound between 1.4632 USD and 1.5881.
So, a couple of questions arise: First off, where will the Pound go next? Will it go on to tumble as it has over the past six months? And, will the decline be constant or volatile? Finally, are there ways to benefit from the currency’s moves – other than acquiring the actual currency?
Related Link: The Fed Raises Rates: How You Could've Played It
Well, binary options provide an interesting alternative.
What Are Binary Options?
Trading via binary options is just that: Playing a binary event. “Binary options are limited risk contracts based on a simple yes/no market proposition like will the markets go up by the end of the trading week,” binary options trading site Nadex explained.
Trading Currency Pairs Via Binaries
A classic Forex Binary Option contract may be: GBP/USD (Wed) > 1.483 (2PM)
In this example, the GBP/USD rate is 1.481.
For traders thinking the GBP/USD rate will stand above 1.483 by 2pm Wednesday, buying this Binary Option could be the way to go.
For those thinking the GBP/USD rate will stand below 1.483 by 2pm Wednesday, selling these contracts makes sense.
Disclosure: Javier Hasse holds no positions in any of the securities mentioned above.
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