Full Review of the Option Builder Tool
The recently released new Option Builder tool is advertised as a method for expert and novice traders to customize their trades according to their own trading styles. The tool, which is very versatile, allows traders to pick more than just call/put and hourly, daily or weekly expiration. The tool allows traders to define their own trading parameters so that the options fit their trading style. You may have heard of this under different broker, that’s because it is powered by the SpotOption trading platform which provides execution and market making for nearly 80% of current binary options brokers.
This is how it works; traders first pick one of the available assets and whether they want a call or a put. Then they are able to choose which expiration time they want. After that they are prompted to enter a risk/reward ratio that fits their risk appetite and that’s it. All that is left is to review the order and press the buy button. The option is purchased according to the traders own parameters.
The first step is easy, you just pick the underlying asset you are trading and go from there. The next step is where the differences from “standard” binary options trading. Instead of picking from a list of hourly, daily or weekly expiration you get to pick the exact hour and minute of expiration, up to 24 hours from purchase. This is good for traders capitalizing on news events that want to close out their positions just prior to or just after the release. It is also good for traders wishing to trade overnight or day to day. The next step is another deviation from the norm. Usually binary options only come with one possible outcome and one risk/reward ratio. With the Option Builder you are able to pick from four different ratios with four distinct outcomes (all outcomes are binary in nature; the difference is in the payout structure). The lower the risk you are willing to take the less your reward. After that step all you do is enter the amount you want to trade and press buy.
Why the Option Builder Tool Doesn’t Suck
There is one real advantage I see in the Option Builder Tool. It allows short term traders to trade overnight. For the most part short term binary option expirations are limited to the day of the trade. They will expire sometime that day up to end of the day. Not many brokers, none that I know of at this time, allow for overnight or day to day expiration. With the Options Builder Tool a trader can enter a trade and then set the expiration for sometime during the next day, provided the market is open on the day. This tool will not work for trades over the weekend.
There is also the perceived safety of the tool. Beginning and experienced traders may be attracted to it because of the choices between risk/reward profiles. But as I mentioned earlier this safety is illusory. In order to achieve the safety of lower risk all you have to do is trade less cash.
Why the Option Builder Tool Sucks
I started out with this assignment thinking that this tool would be really cool. The idea that I could set up my own binary options was awesome! I often want to trade options for longer or shorter than the preset choices on my platform and was looking forward to the chance of defining my own trades. In reality the tool is extremely limited and everything I read leading me up to the tool itself was misleading. Maybe I’m gullible, I don’t know, but what I read lead me to believe there was a large amount of flexibility in the tool. What I found was that it is very limited and not even suited to my style of trading. I like to trade on a weekly and monthly basis, capturing movements on the daily charts with entries on the hourly charts. This tool, like many other binary options brokers and platforms, is totally geared toward day traders and only allows expirations up to 24 hours out.
As for the risk/reward profiles, they only allow you to choose from 4 different options. These are OK but again, they are preset and not really a choice, and besides that, what are you really getting? If you put up the same amount of cash as a standard binary option but pick and choose between their predetermined risk/reward profiles all you are doing is limiting the amount of potential profits from the trade. From my point of view if I want to risk less and limit my gains all I have to do is trade less cash. If I only want to risk $50 then all I have to do is trade $50. The ability to pick higher or lower risk thresholds is not enough of a factor to make me want to use this over any other broker or platform.
My Last Words on the Binary Option Builder
I really wanted to give this one a try but I’m afraid that there are just too many limitations for it to be worth my time. Not to mention that the perceived bonuses to the tool evaporated with closer scrutiny. As for the platform itself, SpotOption is a good one and one that I could recommend. This trading platform is well known and has really cool features on the platform.
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