Different Types of Binary Options
Cash Formula Review
Binary no-touch (also called a lock-out)- A binary option in which the trader only receives payout at expiry only if the binary never reached or extended beyond a predetermined price before expiry (known as the touch barrier). For example, if an option of 20.00 is traded for $222.32 as a binary no-touch option and predicted that the price at expiry will not reach or fall below the range of 17.32. The price of the option either reaches or falls below 17.32 and the trader loses all but $33.35 or the price of the option never reaches or falls below the pre-determined price of 17.32, and the trader receives his payout of $377.94.
This is a good trade for instances in which a trader predicts resistance in an option breaking above a certain price, but expects that the option will not fall below a certain price.
Binary double no-touch (also called double lock-out or range binary)- A binary in which the trader only receives payout at expiry only if the binary never reached or extended beyond either of the two predetermined barriers.
For example, if a trader buys a double no-touch option at a price of 1.43 with 1.44 as the upside barrier level and 1.23 as the downside barrier level. The option moves during the trade period between 1.28 and 1.435, making the trade “in-the-money.” The trader receives his payout.
Had the option broken either barrier, trading over 1.44 or falling below 1.23, the trade would have been out-of-the-money and the trader would not have received his payout.
Double one-touch- A binary option in which the trader receives payout at expiry if the binary reaches or extends beyond either one of the two predetermined barriers. If neither barrier is touched at the time of expiry, the trade is out-of-the-money and the trader does not receive a payout.
For example, if a trader buys a double one-touch option at a price of 5.45, with 5.49 as the upside barrier level and 5.41 as the downside barrier level and the option reaches either beyond 5.49 or below 5.41, his trade is considered in-the-money and payout is received.
This is a good trade for instances in which an economic report is due to be published and the trader believes it will affect the price of the option in one direction or another. It is especially popular in the forex market.
One-touch (also called Lock-in or Touch Digital)- A binary option in which the trader receives payout at expiry only if the binary reaches or extends beyond the predetermined barrier.