Profitsee – Future Economic Surivival

Divinations in Forex, Commodities and Economic Patterns

EUR/USD ATM Strike Compression

4:39 PM 3/19/2007eurusd-atm-strike-compression.PNG
Due to the “Win/Loose” characteristic of the binary, VIX plays the greatest role in the instrument’s valuation at the 9am, 11am, 1pm and 3pm time frames as they are all 1 hour left until expiration and choice cut for time premium trades.

The Strike Compression attempts to spread a stop-loss position, in this example a $6,650 margined position at 50%, against a HS position of 4 contracts valued at $50, when the strike is slightly OTM to the price at the time the binary is put on. The ATM strikes compress time values, like going through a wormhole, as HS deltas explode. 

The example to the left shows the cash position’s stop-loss netted to the binary position. The upper right purple quandrant reflects the net amount the cash is negative until it breaks event above .0008. The purple shaded under HS shows Cash netted against the HS loss, but this is all. The real spread advantage is the larger font figures down below the HS purple range. If your system ranges > 8 pips, then this makes sense for the cash-sensitive.

CONCLUSION: If your system requires that you hold a cash position, why not open up your trades to capturing short term ATM spillage? A lot of HS member also appear to set OTMs that blow through the ATM and then exit at pre-determined ITMs. Either way, using expiry or compression, large orders in noisy markets would benefit from this phenemona.



Filed under: stop-loss

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