Has anyone ever thought of hedging a binary with a very low risk $wise spread? say don’t risk more than 10.00 . To get at least some back in case the binary loses? Could you set the spread to only kick in if the binary drops a certain amount? Would this even be feasible? The low $ risk might make this only feasible with FX. Would there be a better way to hedge a binary? Main thing is to get a portion back in case the binary does lose. Thanks.
The only problem I see is that the price has to go a lot against the binary (or go a lot in favor of spread) to cover the loss in the binary. Even if you set the limit order for spread so that your spread order gets filled only when price drops (or go up) by certain amount, there is no guarantee that the price will continue to go in that direction long enough to cover the loss of binaries.
thanks very much.
This strategy would not be suggested (being hedging a binary with a spread) for the reasons noted above as the spread may not move far enough and you would just be adding to the loss for very little payoff.
There are other strategies like ratios, double binaries etc… that may be a better choice
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