Binary options types

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Binary Options Basics

Binary Options Types, Pros and Cons

Binary options have become very popular investment tool, perhaps due to how simple they seem to be. The name ‘binary’ hints at the fact that traders are presented with two choices. This makes them seem easy to understand, which is part of the reason why traders with fewer skills like them.

The idea is that you are predicting on which way prices in various global markets will go in a specified period of time. If you guess correctly then you claim your profit, and if you guess incorrectly, you lose your stake. That’s it!

Binary Options Basics – What are They?

One of the binary options basics you need to be aware of is that the type you’ll see traded most often is called a high-low or fixed-return option, which lets you wager on the movements of stocks, indices, commodities and foreign exchange. These options expire at a predetermined date, time and strike price. If a trader bets correctly on the market’s direction and the final price when the deal expires, they get paid a fixed amount. It doesn’t matter if the instrument has moved a little or a lot since the trade was opened, it just counts as a win, and the trader still receives that same amount. If they get it wrong, they lose their original stake.

So, you see how simple life as a binary options trader appears to be? You’re betting that a stock, index, commodity or currency pair is going to go one way or the other. If you think your asset or index is going to go up, you take what’s called a “call.” If you think it’s going to drop, then you take what’s called a “put.” A call makes money when the instrument is trading higher than the strike price. A put makes money when the instrument is trading lower than the strike price when the deal expires. The broker lets you know what the strike price, expiration date, payout, and risk are when the trade is first set up. With the majority of high-low binary options traded beyond US borders, the strike price is usually the current market price of the asset or index.

US Binary Options vs. Overseas Binary Options

In countries outside the US, binary options usually pay out a set amount and bring a set level of risk. It’s also brokers who offer them directly instead of an exchange. The brokers make their money by taking in more on losing trades than they pay out on winning trades. Apart from certain exceptions, these financial instruments will usually be held until the date of expiry.

US Binary options listings were first made available by the Chicago Board Options Exchange (CBOE) in 2008, which is regulated by the SEC.

These options can be traded at any time, with the rate sitting somewhere between one and a hundred, depending on how likely each one is to make or lose money. On-screen, the trader sees a totally transparent deal and is free to cut their losses or walk away with their profits before the expiry time if they want to.

A trader may also choose to enter while the rate is fluctuating, in order to take advantage of different risk-to-reward situations, or hold until the trade expires, closing the position at the highest amount of gain or loss as compared to what it was when they entered.

Since US binary options are traded on an exchange, this means that every trade takes place between a buyer and a seller who are willing to enter into this arrangement with each other. To make its money the exchange adds a fee that matches counter-parties.

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    Free Demo Account!
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Example of a High-Low Option

In this example, you believe that the NASDAQ index will rally for the duration of the trading day, so you purchase an index call option. The index is currently trading at 1,700, so you’re betting that when your trade expires it will be sitting at a higher number. You have a huge amount of choice when it comes to selecting when you want that expiration time to be. You could choose minutes away, or you could settle for months. It all depends on what your analysis points to. If it suggests that 30 minutes from now would be the best time, then you can choose that. This ‘for example’ deal will pay out 60% on top of your original stake if the NASDAQ rises above 1,800 at that time. If it drops to less than that then you will lose your stake. Minimum and maximum stakes vary from broker to broker.

Let’s say you invest $100 in the call. Expiration is in 30 minutes. The NASDAQ price at expiration is where the clock stops and determines whether you win or lose. The price at expiration could be the last quoted price, or the (bid+ask)/2. Every broker will have their own price rules about expiration.

With this example, we’re assuming that the last quote on the NASDAQ before expiration was 1,703, which means you get a $120 profit (because that’s 60% of $200). You also get your original $200 investment back as well. But if the price at expiration had been 1699 you would kiss your original $200 goodbye.

In the event that the price on expiration is exactly the same as the strike price, the trader usually gets their money back, although you should check with individual brokers to be sure of what their rules are. Any profits that you make will be added to your trader count automatically as soon as the position is closed.

Other Types of Binary Options

This example is for a typical high-low binary option—the most often traded binary option outside the US, but international brokers will usually offer a whole host of other types of binaries too. Here are two examples:

  • “one-touch” options. The asset you’re trading needs to hit the strike price only once before expiration to make you some money. Targets are set above and below the present price, so traders can pick which one they think the price will hit before the expiration date and time.
  • “range” options. The trader defines a price range that the asset will trade inside until expiry. You win if the price doesn’t step outside this range. You lose if it does.

With a lot of brokers competing in the binary options arena, some have taken to offering products that give payouts between 40% and 400%. Many will have different structures and requirements, but you’ll always know the elements of risk and reward before you embark upon the trade. This potentially means you can make a lot of money from your investment, but brokers don’t give money away, so with such big headline figures, chances are you won’t.

In contrast to US binary option brokers, there are some foreign brokers who will permit traders to exit positions before they expire, but most don’t. Doing this before a position expires usually means the broker won’t pay out as much, or you’ll suffer a modest loss, but not have to give up the whole investment.

The Pros and Cons of Binary Options

You’ll always know the risk and reward ahead of time, which eliminates a huge amount of doubt. And you’ll always know how much you’re going to win or lose because both amounts are fixed. No trader likes unforeseen surprises, so this is a big plus for this kind of trading. Another one is the fact that there are often no fees or commissions to be paid.

Simplicity is obviously a factor because you’re essentially tossing a coin and placing a wager on heads or tails. The asset either goes up or it goes down.

You also don’t need to worry about liquidity, because as a trader you won’t be taking ownership of any underlying asset.

Brokers can offer endless strike prices and expiration times and dates, so there are lots of choices. It’s also worth bearing in mind that at any time of the day or night market is open somewhere doing a roaring trade in many different asset classes..

Binary Options Types in the Current Market and their Strategies – Binoption

Have you gone through the basics and terminologies of binary option trading and wondering what are the binary options types available in the present market that can be considered for trading?

Curious to know what are the simple styles and complex type of trading binary options?

This page will help you to get all necessary information regarding the various binary options types and the working style.

With this information as a trader you will be able to take a call and decide with options are simple and budgeted and which needs lot of effort, investment and time.

It’s crucial to pick trading assets and instruments that go along with your trading style.

Else there will be no relation between the two and will not work to generate profits.

Binary Options Types

Here is the list of commonly traded types of binary options.

From the basic call and put up to Trading 60 Seconds Binary Options is explained below and this information will be a one stop solution for with all information on binary option trade types.

1. Call and put option: The first and most basic type of option any new trader who would like to pick as it is easy to understand and has very simple process.

This is also the best option to get started with a career in binary option trading.

It is said to be a call option when you have picked up an asset that you wish to trade and post analysis you determine mine the price of the asset is going to shoot up.

Predicting this you will decide to place a trade on the asset and will choose Call option.

This is done at the basis of technical and fundamental analysis of the present and past conditions of the market, any financial news out break or due to some political reasons.

On the other hand Put option in binary trading is the opposite of call option.

Here you will predict the market price to go down and in that case you will book the trade and choose Put option.

Thus even if the market price falls than the current price, you will make a profit.

Also in binary option trading it is essential to keep in mind, the assets or the whole value of the asset is not exchanged.

Just the difference between the buy and sell (profit) is given by one trader (trader who losses) to the other one (the one who wins).

2. One touch: In this type of option there will be a pre-determined barrier which is known as the trigger level.

If the current market prices hit this trigger level then the trade would be in the money and if it does not reach until the expiration date, then it would be out of the money.

Another important point to be considered is if it is an American option, European option or Bermudan Option.

In American Option, the expiry of the trade is any time during the whole period of the trade.

In European option, the expiry will be determined only on the expiration date at the expiration time.

And Bermudan options where is the expiration dates are customized as per the requirement of each trades.

3. No touch: The opposite of one touch option is no touch;

In this case there will be a pre-determined barrier which is known as the trigger level.

If the current market prices does not hit this trigger level then the trade would be in the money and if it does reach within the expiration date, then it would be out of the money.

Basically, it’s the vice versa of the previous one.

4. Double One Touch: The logic of one touch and double one touch is the same.

Only difference is in double one touch there will be two trigger levels.

As an example if the current market prices hit this trigger levels either trigger 1 or trigger 2 then the trade would be in the money;

And if it doesn’t reach until the expiration date, then it would be out of the money.

Traders prefer this one more than one touch binary as there is an upper limit and lower limit.

The risk is less and there is chance of making profit is market swings unusually either ways of the current price.

5. Double no touch: The simplest way to explain this is it is the opposite of double one touch and works with the similar strategy of No touch binary trade.

If the current market prices does not hit the trigger levels either trigger 1 or trigger 2 then the trade would be out the money;

And if it hits before the expiration date, then it would be in the money.

Traders prefer this one instead of one touch binary as there is an upper limit and lower limit.

The risk is less and there is chance of making profit is market swings unusually either ways of the current price.

6. Paired options: This is an exotic type of binary option.

Not every broker offers this type of options for trading as there are lot of complexity and relativeness required between one asset and the other.

A pair of assets is choose and traded and these are expected to outperform during a selected period of time.

Binary option depends on the result of the option which is either the price goes down or goes up.

The payout is dependent on the predictions and investment of the trader.

If the prediction turns out to be right, then there will be profit else it will lead to loss.

The types of binary options does not end here, there are still more types of options.

However, these are some of the commonly traded less complex styles of binary option.

Apart from these some traders even customize their transaction with various probabilities and it is called as structured trades.

If traders can understand the mechanism of these trades, making profits will be like cake walk.

Main Types of Binary Options

Many binary option traders started off trading with the common high-low binary option. Once they are more experienced, many binary option traders will look to more advanced types of options to get an edge on the market.

Note that even the term binary option carries different meaning depending on where you reside. In this article, we are talking about the more popular variety, which is the european binary option traded outside the United States.

High-Low Binary Options

This is the most common type of binary option used by novice traders. Traders buy a call if they expect the underlying price to go up or a put if they expect the underlying price to go down.

One Touch Binary Options

When a trader purchases a one-touch binary option, a payout is earned when the underlying asset price reaches or surpasses a specific price barrier anytime before the option expires.

No Touch Binary Option

Conversely, for a no-touch binary option, a payout is earned when the underlying asset price does not reach or surpass a specific price barrier before the option expires.

Double One Touch/No Touch Options

With double touch/no touch binary options, there are two price barriers – namely the upper or lower price barrier – for the underlying asset price to either hit or miss in order to receive a payout.

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. ]

Binary Options

What are binary options

A binary option is a type of option with a fixed payout in which you predict the outcome from two possible results. If your prediction is correct, you receive the agreed payout. If not, you lose your initial stake, and nothing more. It’s called ‘binary’ because there can be only two outcomes – win or lose.

Advantages of binary options trading

Aside from the simplicity of its ‘yes or no’ proposition, binary options trading is also very flexible. It gives you the ability to trade:

  • All markets

Trade on underlying markets that include Forex, indices, commodities, and more.

  • All market conditions

Predict market movement using up/down, touch/no touch, and in/out trade types.

  • All durations

Take a short-term or long-term view with trade durations from 10 seconds to 365 days.

  • All payouts

Earn payouts up to USD 50,000. Losses are limited to your initial stake and nothing more.

Why you should trade binary options with

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  • Scalable
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How to trade binary options

Binary options trading is relatively easy. You can purchase a contract in just three steps:

Best Binary Options Brokers 2020:
  • Binarium

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    Perfect For Beginners!
    Free Demo Account!
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  • Binomo

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How To Make Money on Binary Options Trading
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