Also known as hedge and double position, this is a clever strategy which possesses the ability to provide you with windows of opportunity for high returns while minimizing your risk exposure in the process. For example, imagine that you have opened a ‘call’ binary option which had an opening or strike price of $20. Now assume that you have achieved a favorable position and are now in-the-money with the current price standing at $24. However, you are worried that a serious price retraction could occur which could wipe out all your profits and could even cause losses. To safeguard your gains from such an eventuality, you could, at this point, open a new ‘put’ option and pair it with your original ‘call’ one.
By doing so, you would create an opportunity window between $20 and $24. This is because if price finishes within this range at expiry time then you will receive profit payouts from both options. In addition, you would also significantly reduce your risk exposure because should the value of price finish outside this window at expiry time then the profit of one of your options will almost totally negate the loss of the other.