Binary Option Types

Best Binary Options Brokers 2020:
  • Binarium
    Binarium

    Best Binary Options Broker 2020!
    Good Choice for Beginners!
    Free Trading Education, Free Demo Account!
    Get a Sign-Up Bonus Now!

  • Binomo
    Binomo

    2nd in our ranking!

3 Types Of Binary Options

The main factor when talking about payouts is the type of binary option traded.

The option trade example given in the previous section is a type of an “up/down” option and is considered the simplest kind.

Predicting if a currency pair would be above or below the strike price before it expires pays the lowest return.

Meanwhile, the are more complicated kinds of options like the “touch and range” binary options, which have higher payouts since winning such trades tends to be harder.

Up/Down Options

An Up/Down option can go by a few different names: High/Low, Above/Below, and Over/Under. It is the simplest and most common type of binary option.

Traders simply purchase a “call” option if they believe that the closing price will be above the strike price when the contract expires, or buy a “put” option if they think that market will close below the strike price at expiration.

The EUR/USD trade example given in the previous section illustrates how an Up/Down option typically works.

Easy enough, eh? The simplicity of this option is why Up/Down options usually have the lowest payouts.

Up/Down options typically expire within an hour or a day, but some brokers are offering options that expire in minutes. Heck, some even expire in seconds!

Of course, this could either do your account a lot of good or it can cause a whole lot of damage. Make sure you manage your risk properly!

Best Binary Options Brokers 2020:
  • Binarium
    Binarium

    Best Binary Options Broker 2020!
    Good Choice for Beginners!
    Free Trading Education, Free Demo Account!
    Get a Sign-Up Bonus Now!

  • Binomo
    Binomo

    2nd in our ranking!

Touch Options

One Touch option trades don’t require the market to be above or below a certain level at expiration. Instead, it just needs to TOUCH the strike price at least once during the option contract period for it to be profitable.

No-Touch trades, on the other hand, require that the market price DOES NOT TOUCH the strike price during the life of the contract for a trader to make profits.

For example, let’s say that EUR/USD closed at 1.3100 on Friday.

Over the weekend your broker offers a call option where you will profit if EUR/USD touches 1.3450 at least once next week and a put option where you will profit if the pair touches 1.2750 at least once in the same period.

You decide to take the call option. You find that during the option period EUR/USD had reached a high of 1.3600 before it closed at 1.3050.

Since the market reached the call option’s strike price (1.3450) within the option period, you would have won the trade even if it didn’t close above the level.

On the contrary, those who took a No-Touch option on the same price would have lost their trades since the pair DID touch the strike price.

Touch trades typically work out well when volatility picks up while no-touch trades are ideal for pairs that have a tendency to consolidate.

Still not exciting enough for ya?

You can also try out Double Touch/Double No-Touch options!

They are just like Touch/No-Touch options, only with two strike prices. The asset’s price has to touch (or not touch) two different levels for a trader to win the trade.

Range Options

Trading Range/Boundary/Tunnel options is a lot like playing the Super Mario underwater level wherein Mario cannot touch both the top and the bottom of the screen.

For In Range trades, the market price must stay within a predetermined range and avoid touching the two strike prices within the option period in order for your trade to be in-the-money.

Some brokers offer Out of Range options where traders can profit if price breaks out of the predetermined range within the option period.

For example, EUR/USD is currently trading at 1.3300 and the ECB interest rate decision is minutes away.

If price doesn’t reach 1.3280 or 1.3320 within the option period, then you would have won your trade.

That should be awesome news for you because range options usually have the highest payouts with a few brokers offering between 200%-750%!

Range options are best used when volatility is low, although some brokers offer the option to take a risk on the idea that price WILL break out of the predetermined range.

Alternatively, a few brokers also offer options on predetermined ranges that are far from the current market price.

Types of Binary Options

Binary options in the US – regulated and exchange-traded only.

The only way to trade binary options legally in the United States is on a CFTC-regulated, United States based exchange.

Binary options are sometimes offered by a broker. Nadex is different and offers a sharp contrast.

We offer a revolutionary approach to trading for the active short-term trader. We do it as a well-regulated, leading US based binary options exchange.

This is an important difference you will want to understand.

Our job as an exchange is to match buyers and sellers across a wide range of active global markets.

We never take the other side of a trade, but many brokers do. What that means for you is if you trade with a broker, they could be on the other side of your trade and profit only if you fail.

Our interest is in supporting a dynamic marketplace built with the short term, active trader in mind. We take our role seriously as the leading US based exchange offering binary options.

As a leading exchange, we want you to have everything you need to trade. We offer different strikes, timeframes and markets to choose from. It’s why we provide both a robust desktop platform and a brand new mobile app specifically built for short term traders.

And it’s the reason we work to offer such wide access to dynamic trading opportunities across all the markets you love.

Volatility and binary options.

Volatility moves markets, drives trading decisions and of course can make things fun.

The ability to harness that volatility means opportunity when you are trading.

It’s why we created our binary options in a way to allow exposure to volatility with a simple, easy to follow approach.

Our binary options provide unique opportunities to make short term trades and capture volatility, while also providing the flexibility to close positions early and the control to allow traders to set their own level of risk.

One of the ways binary options offer exposure to volatility is based on the pricing of the contract relative to the underlying market.

The more active the underlying market, the more movement in the binary option’s price and even in relatively flat underlying markets, the at-the-money binary options can be volatile.

We are offer a wide range of opportunities to trade based on volatility with binary options. It’s why we create more strike prices and offer more contracts on a broad range of active global markets.

Different timeframes to trade binary options.

We believe traders should have straightforward access to multiple global markets around the clock.

And we want to provide multiple time frames within our 23 hour trading day for you to trade.

Choose timeframes lasting 5 minutes to two hours and up to a week with plenty of opportunities in between.

Trading at Nadex is dynamic and markets can move fast.

For many, that type of fluid activity is exactly why they started trading.

We’ve created a vibrant marketplace that provides the variety to trade stock indices, forex, and commodities from a single account.

But the opportunities to trade with us really grow when you consider all of the time horizons our contracts cover and the number of strikes we offer in each market.

While binary options are sought by day traders wanting trades in short time horizons, Nadex offers a lot of variability and choices when it comes to the length of our short term contracts with multiple opportunities to trade throughout the day and the week.

Each time frame has its advantages.

Traders wanting to harness volatility in flat or trending markets like shorter frames because as the market gets closer to expiration, the price of the binary can fluctuate with increased volatility.

This makes for very active and exciting market action.

If you want to take a position that spans a few hours, or a day or week, you can do that too.

This enables you to trade based on a variety of different strategies. And you’ll always have the flexibility to close positions early to take profits or limit losses.

Other Types of Binary Options

You will learn about the following concepts

  • One-touch options
  • No-touch options
  • Double one-touch options
  • Double no-touch options
  • Paired options

As you already should have learned by now, binary options are called “binary” because your payout depends on only two possible outcomes – the price either goes up or down. You will receive your payout depending on whether you have predicted the direction correctly or not.

The simplest variation of binary options are the pure Call and Put options. You purchase a Call option, if you think that the price will go up. Conversely, a Put option speculates that the price will go down. However, the variety of binary options does not end here and the more advanced traders have a set of more exotic options at their disposal. Lets have a look.

Best Forex Brokers for United States

One Touch

This type of option pays out an investors profit once the price of the underlying asset reaches a predetermined barrier, also known as a “trigger”. Once the trigger level has been reached, the trader will receive his payout. This type of option is preferred when an investor is sure that the assets price will perform a strong move in a certain direction and will hit the trigger value, disregarding whether the price jump is sustainable or the market will retrace.

Unlike the standard binary option where you only have to predict whether the price will go up or down, here both the direction of movement and the trigger level are predetermined (some brokers allow traders to set these levels). You only have to decide whether the conditions will come into fulfillment. Although for the option to be “in-the-money” it will have to touch the trigger level only once, the one-touch option is generally more riskier than standard binary options and therefore offers a higher payout, which can reach up to 500% with some brokers. Also, these options are generally available for purchase during the weekend with the payout condition being to reach the trigger level within the next working week.

No Touch

The no-touch option works in the opposite fashion to one-touch options. Here you wager that the underlying asset will not reach a certain price level. Just like the one-touch option, you, or your broker, select a certain price level above or below the spot (current) price and bet that the price will not reach the determined level within the expiration period. If it does hit it, even once, the option will instantly become “out-of-the-money”, and vice versa.

As for the return, due to the higher risk they carry, these options can also yield a return of up to 500%, depending on the distance to the trigger value. Both touch and no-touch options offer a higher payout, if the conditions are harder to fulfill.

One-touch options will pay out more money, if the trigger is further away from the spot price. For example, if gold currently trades at $1 300 per troy ounce, a one-touch option with trigger at $1 350 will offer a higher return than one with a trigger at $1 325.

Conversely, no-touch binary options offer higher return the closer the trigger is. Thus, a trigger of $1 325 will pay out more money than a trigger of $1 350, because the chance of hitting the closer target is higher (the risk for the option to become “out-of-the-money” is greater).

Double One Touch

Double one-touch options follow the same logic as one-touch options. However, here we have two triggers, one of each side of the spot price. Your option will become “in-the-money” if the price of the underlying asset breaks through one of the triggers, no matter which one.

For example, if gold currently trades at $1 300, and you, or your broker, have set the upper trigger at $1 350 and the lower trigger at $1 250, your option will be profitable if gold either rises to $1 350, or falls to $1 250. Conversely, if the price fails to touch any of the two triggers through the expiry time, it will become “out-of-the-money”.

Thus, double no-touch options are suitable for conditions of market consolidation when the trader is sure that the price will accelerate and break out soon, but doesnt know in exactly which direction.

Double No Touch

As logic dictates, double no-touch options follow exactly the opposite principle compared to the double-touch options. Here we have two triggers as well, but for the option to be “in-the-money” the underlying assets price shouldnt reach either of them during the expiration period. In case one of them is hit, the option becomes “out-of-the-money” and you lose your investment. Thus, traders generally prefer to invest in such an instrument when they expect that the market will consolidate in a tight trading range, which often comes after a buy or sell climax (a strong price spike).

Paired options

Paired options are another, more exotic, type of binary options. They are offered only by some brokers and basically are based on the performance of one asset relative to another. Here the trader chooses a pair of assets from a list and bets which asset will outperform the other during the selected period. Assets are paired according to their class and sector (these categories must match).

Best Binary Options Brokers 2020:
  • Binarium
    Binarium

    Best Binary Options Broker 2020!
    Good Choice for Beginners!
    Free Trading Education, Free Demo Account!
    Get a Sign-Up Bonus Now!

  • Binomo
    Binomo

    2nd in our ranking!

Like this post? Please share to your friends:
How To Start Binary Options Trading 2020
Leave a Reply

;-) :| :x :twisted: :smile: :shock: :sad: :roll: :razz: :oops: :o :mrgreen: :lol: :idea: :grin: :evil: :cry: :cool: :arrow: :???: :?: :!: