This technique is sort of widespread amongst choices merchants. It's designed and employed by a dealer to safeguard him/herself from incurring complete losses on their investments. You'll decide an underlying asset or foreign money that you're involved in after which if the market motion of the strike worth is heading in the direction of course, say upwards, you place a name choice. On the similar time, you'll place a put choice on the identical asset.
Let’s use an instance:
The GBP/USD foreign money choice goes at 1:4000. You place the decision choice of $100 which can expire in 30 minutes. The payout is 70% and 15% when you lose. Within the first 15 minutes the asset is at 1:4015 which is sweet thus far. At this particular time, you purchase a put choice for a similar asset at 1:4015 expiring in 15 minutes at $100. The payouts are the identical as these of the decision choice.
On the finish of the 30 minutes there shall be two outcomes;
Your 30 minutes name choice wins and the 15 minutes put choice losses. You should have earned $185 from the 70% name winnings and the 15% comfort refund from the put choice (the other can occur, put choice wins and name choice losses).
Each the decision and the put choices find yourself within the cash. You'll get $340 ($170+$170). Because it’s virtually unattainable to lose on each choices, the overall danger of loss on this technique is barely $15 as a way to win $140.