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Types of Binary Options
Types of Binary Options
Binary options offer various types of contracts that cater to different trading preferences and market conditions. In this guide, we'll explore the different types of binary options available in the market and how they work.
1. High/Low Options
High/Low options, also known as Call/Put options, are the most basic and common type of binary option. Traders predict whether the price of an underlying asset will be higher or lower than the current price (strike price) at the expiry time. If the trader's prediction is correct, the option expires "in the money," and the trader receives a fixed payout. Otherwise, the option expires "out of the money," and the trader loses the initial investment.
2. One-Touch Options
One-Touch options require the price of the underlying asset to touch a predetermined price level (trigger price) at least once before the option's expiry. If the trigger price is reached, the option automatically expires "in the money," regardless of whether the price moves away from the trigger price before expiry. One-Touch options offer higher payouts than High/Low options but are riskier as they require a specific price movement to occur within a specified time frame.
3. No-Touch Options
No-Touch options are the opposite of One-Touch options. Traders speculate that the price of the underlying asset will not touch a predetermined price level (barrier) before the option's expiry. If the price remains below the barrier (for a No-Touch Above option) or above the barrier (for a No-Touch Below option) until expiry, the option expires "in the money," and the trader receives a fixed payout.
4. Boundary Options (Range Options)
Boundary options, also known as Range options, involve predicting whether the price of an underlying asset will remain within a specified price range (boundary) or break out of the range by expiry. Traders select a high boundary and a low boundary, and if the price stays within this range until expiry, the option expires "in the money." Boundary options offer relatively high payouts but require the price to remain within a defined range, making them suitable for range-bound market conditions.
5. 60-Second Options
60-Second options, also referred to as Turbo options or Short-Term options, have an extremely short expiry time of just 60 seconds. Traders must predict whether the price of the underlying asset will be higher or lower than the current price at the end of the 60-second period. These options provide quick trading opportunities and instant results but require rapid decision-making and precise timing.
Conclusion
Understanding the different types of binary options available in the market allows traders to diversify their trading strategies and adapt to various market conditions. Whether trading High/Low options for simplicity, One-Touch or No-Touch options for directional price movements, Boundary options for range-bound markets, or 60-Second options for rapid trading, each type offers unique opportunities and challenges. By selecting the most suitable option type based on market analysis and trading preferences, traders can optimize their chances of success in binary options trading.
References:
Investopedia: Binary Options
BinaryOptions.net: Types of Binary Options
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