Binary Options One Touch Trading

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One-Touch Binary Options Explained

With the one-touch binary option trade, the binary options trader selects a strike price above or below the current market price as well as an expiration time. The broker will offer him a payout percentage corresponding to his selection.

For the investment to payoff, the price of the underlying asset only needs to hit the strike price once before the option expires and does not need to exceed this level at the time of expiry.

Payout will vary greatly depending how far away is the strike price and the time till expiration. The further away the strike price, the higher the payout. The longer the expiration time, the lower the payout as one has more time to hit the target.

Unlike the common high-low variant where the payout rarely exceed 90%, the payouts for one touch binary options can easily exceed 100% and payouts between 200% to 500% are not uncommon.

It is entirely up to the trader how much he wishes to invest with each purchase of the binary option but the minimum and maximum he can put in with each option varies across brokerages.

One Touch Binary Option Example

EUR/USD is currently trading at $1.29. A binary options brokerage is offering 200% payout for the one-touch binary option with a strike price of $1.30 that expires in 5 minutes.

After tracking the price movement of EUR/USD for the past hour, the binary option trader believes that the price will hit $1.30 within the next 5 minutes and decides to invest $100 to purchase this one-touch binary option.

If EUR/USD goes up to $1.30 anytime within the next five minutes, the investment pays off and the trader earns a profit of 200% of his initial investment, which is $200.

However, if the price of EUR/USD never rise to the $1.30 price point during the whole 5 minutes, the trader will have lost his initial investment of $100.

Note that it does not matter whether the price of EUR/USD skyrocketed up to $1.40 or flash crashed below $1.00, both the profit and loss will be fixed at $200 and $100 respectively.

Best Binary Options Brokers 2020:
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    Binarium

    Best Binary Options Broker 2020!
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  • Binomo
    Binomo

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No-Touch Binary Option

Conversely, there is the no-touch variant as well. See No-Touch Binary Options.

See Also

Continue Reading.

What are the Main Types of Binary Options?

Learn how the One-Touch, No-Touch and Range/Boundary binary options differ from the common high-low viety and how to trade them. [Read on. ]

What Assets can be Traded using Binary Options?

Many of the most popular financial instruments such as currency pairs, equities and commodities are available to trade using binary options. . [Read on. ]

Binary Options: Trading or Gambling?

Is binary option a legitimate financial instrument or just another form of gambling. [Read on. ]

Binary Options & Trading Robots: A Perfect Match?

Unlike humans, robots have no emotion and do not need to rest, so they can make a lot more trades than humanly possible, combined with perfect consistency. [Read on. ]

Is Binary Options Trading a Scam?

Learn how you can get scammed when trading binary options if you are not careful. [Read on. ]

How to Select a Binary Options Broker?

With so many scam brokers out there, before you learn how to trade, one must know how to separate the wheat from the chaff and find a trustworthy binary options brokerage. [Read on. ]

Binary Options: Calculating Breakeven Win-Rate for a Given Payout

How often does my trades need to be successful in order to be consistently profitable in the long run when trading binary options. [Read on. ]

One-Touch Option

What Is a One-Touch Option?

A one-touch option pays a premium to the holder of the option if the spot rate reaches the strike price at any time prior to option expiration.

Key Takeaways

  • A one-touch option pays a premium to the holder of the option if the spot rate reaches the strike price at any time prior to option expiration.
  • One-touch options are usually less expensive than other exotic or binary options like double one-touch, or barrier options.
  • Derivatives, like one-touch options, are not frequently traded by small investors.

Understanding One-Touch Options

One-touch options allow investors to choose the target price, time to expiration, and the premium to be received when the target price is reached. Compared to vanilla calls and puts, one-touch options allow investors to profit from a simplified yes-or-no market forecast. Only two outcomes are possible with a one-touch option if an investor holds the contract all the way through expiration:

  1. The target price is reached and the trader collects the full premium.
  2. The target price is not reached and the trader loses the amount originally paid to open the trade.

Like regular call and put options, most one-touch option trades can be closed before expiration for a profit or a loss depending on how close the underlying market or asset is to the target price.

One-touch options are useful for traders who believe that the price of an underlying market or asset will meet or breach a certain price level in the future, but who are not certain that price level is sustainable. Because a one-touch option has only a yes-or-no outcome by expiration, it is generally less expensive than other exotic or binary options like double one-touch or barrier options.

Derivatives, like one-touch options, are not frequently traded by small investors. There are some trading venues where they are available, but regulators in Europe and the U.S. have often warned investors that they may be overpriced. In many cases it is not possible to take advantage of that mispricing by becoming an option writer or seller. Binary or exotic derivatives are usually traded by institutions who can negotiate with each other for better pricing.

Outcome #1: Price approaches target price

A trader believes the S&P 500 will rise by 5% at some point over the next 90 days, but is not as certain about how long the index will remain at or above that price. The trader pays $45 per contract to buy one-touch options that pay $100 per contract, if the S&P 500 meets or exceeds that target price at any point over the next 90 days. Assume that two weeks later the S&P 500 has risen 2%, which has increased the value of the position because it is more likely that the index will reach that target price. The trader could choose to sell their one-touch option contracts for a profit or continue to hold the trade through expiration.

Outcome #2: Price remains flat or moves away from target price

Assume that a trader originally believed the S&P 500 would rise 5% over the next 90 days and opened a one-touch option trade to profit from his forecast. The trader paid $45 for one-touch option contracts that will pay $100 per contract if the target price is reached. Instead of rising, the index drops 3% on unexpected news a week later, which makes it less likely that the target price would be reached before the options expire. This trader may then decide to either sell the options and close the trade at a lower price for a loss or hold it in the hopes that the market recovers.

Types of Binary Bets – One Touch

The Touch binary option trade is one of the binary option trades in the Touch/No Touch category. Touch is based on if the price action of the traded asset touches a price barrier before the expiration of the trade.

A “One Touch” binary option is a trade type where the trader purchases an option that will deliver profit if the market price of the asset purchased touches the set target price at least once before the expiry of the date.

If we look at the chart below, this shows an example of a One Touch trade on the trading platform of Betonmarkets, one of the binary options brokers that offer this trade variety.

We can see here that the financial asset is spot gold, to be purchased at a spot price of 1570.95. The price barrier (which can be adjusted by the trader) has been set in this example to 1599.33. The payout for this trade, including the original capital is $200. For us to trade the One Touch, we have to buy the bet at a price of $120.60, and set the expiration to 7 days (which is the minimum expiration time Betonmarkets allows on their platform). This gives a profit of roughly 40% if the trade is a winner.

Now notice a few things. The profit payout is only 40%, which in binary options terms, is nowhere near the maximum payout of 80 – 85%. The reason for this is that our price barrier is quite close to the current market price. As a rule, the closer the price barrier to the market price, the lesser the payout the trade will give.

Let us look at a live trade example of gold, done on 19 th October 2020. The trade was a Touch trade, aiming to predict that the price of gold would hit $1690 an ounce before the 7-day expiration on Betonmarkets.

At the time of the trade, gold was at $1649 an ounce. The fact that our price barrier of $1690 was far from the market price meant that the trade only cost $45.59, expecting a total payout (capital + profit) of $100 from the trade.

By day 2, the price of gold had begun to drop, and even went as low as $1603 an ounce, sending the trade down. A reverse head and shoulders pattern developed on day 3, causing a remarkable spike on the 4 th day that sent the trade into winning territory for the payout.

This trade was not perfect, and was made with a fundamental view. If we had paid more attention to the technical aspects of this trade, this would have increased the payout dramatically.

This is one way to play the markets.

How to Trade the “One Touch” Binary Option

This is simple if you know what you are doing. All it requires is one touch for you to have money in the bank. But the key questions are:

– What price barrier do you set to allow the trade make that single touch?

– How far should you set the price barrier to enable the best possible payout without setting the target too far out?

– What expiration time do you use?

The first thing to realise is that the touch you need could be in any direction, bullish or bearish. You must carry out proper technical and fundamental analysis to determine which direction the market is most likely to end up. This will enable you set the correct barrier. In our example, the fundamentals were pointing to renewed safe haven purchases of gold as a result of the Eurozone crisis; a trade call which turned out to be correct.

Secondly, tweak the barrier prices. Binary options platforms are set to allow you know what the trade costs and payouts will be. That way, you can strike a good balance between costs and payouts.

Thirdly, platforms like Betonmarkets have a default minimum of 7 days. This is a reasonable time to give a trade to make the target. All it takes is one touch. Even if the market reverses thereafter, you have achieved your target and by the 7 th day, you will get paid.

So trade the One Touch and make your money using these strategies.

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!

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