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Cme gold options settlement
What is pairs trading? There is more than one kind of pairs trading but in this article we will be discussing Stockpair pair options trading. Since that time pairs trading with options has rapidly gained in popularity and mainstream acceptance by the trading community.
However, the pair options offered by these brokers are a bit different from those offered by Stockpair. Simply meaning that overall market conditions are irrelevant to the outcome of your trades. You can make money on up or down markets with equal ease, it makes no difference. But first some highlights…. I think that those are probably the main and most important highlights of pair options trading.
Certainly there are others, but you will discover them on your own easily enough if you decide to try pairs trading. That is, everyone besides Stockpair. This variety is quite simple and they are very similar to a forex trade in most ways. The only major difference is that the assets paired are stocks and commodities instead of currencies.
Stockpair, as the name implies, specializes in pairs trading. They were the first to bring pair options trading to the retail sector. As such they have a unique and proprietary trading platform that was built around the idea of pair options. They later added binary options as well and are a strong competitor in that area too.
Stockpair is the undisputed king of pair options trading and they do it extremely well. Unfortunately, they no longer accept US traders. But they do accept clients from most EU countries. Which is why binary brokers were able to incorporate at least limited pairs trading into their platforms. Stockpair pair options trading offers more asset variety and features than the pairs trading offered by other binary option brokers. They also offer a much better expiry selection. With ranges from 5 minutes all the way up to days!
They generally offer higher return rates on their fixed pairs than the other brokers as well. With these contracts performance is measured only from the time of purchase forward, until expiry. Lets say our hypothetical trader believes that Google is likely to perform better than Facebook over the next two weeks.
Nothing that has taken place before now matters to our trade. Now let us further assume that our hypothetical trader was correct. Fast forwarding to the end of our two-week expiry window we have the following results. Floating pair options are only available at Stockpair as far as we know. There is a lot of flexibility and room for pair trading strategies with these contracts. They are what made Stockpair a star originally. With floating pair options contracts performance is measured over a fixed period of time.
They do not reset at the time of purchase. Which sounds more complicated than it really is. These contracts are only available with three expiry windows though. They are offered for a day, a week or a month. Performance is measured over the whole of those periods.
As a result divergences can grow quite wide. In this example the expiry window for the floating pairs trade is one day. And this image shows a couple of hours into the day. At this point RIO had performed significantly better so far that day. Therefore RIO had the better chance of finishing the day as the dominant performer. Our hypothetical trader believes that RIO is almost certain to maintain its lead throughout the day. And it would have to happen over the course of the rest of this day.
Certainly possible but very unlikely given the circumstances. And in fact our trader was correct. Not a huge gain. But also not bad for such a high-probability trade. It is that kind of flexibility that makes these options so useful and fun to trade. We will also be publishing some in-depth pair options strategy material in coming months. Stay tuned for that. We have really enjoyed pair options trading ever since we first tried them.
Unfortunately, as US traders ourselves we can no longer trade at Stockpair, and our favorite US broker, discussed here in our Raceoption review , unfortunately does not offer Pair Options. But most of the rest of the world is still welcome.