Forex Trading:Types Of Binary Options
What are the Different Types of Binary Options?
Binary option trading has become very popular in the past few years. The reasons for this binary option “boom” are many. First of all everything happens online and even people who are venturing the market for the first time can access the trading platform of any binary options broker. The minimum initial capital that is required is also very small when compared to traditional Forex trading and this enables traders from every caliber to enter the market and start placing deals immediately after depositing funds in their accounts. Last but not least, trading binary options is easy to understand and can be performed by virtually anyone who has basic computer knowledge and good internet connection.
Generally speaking buying a binary option is equal to signing a contract for the price of the underlying asset. When we look at the various types of binary options, we have to mention the one that is traded the most on all platforms – the Call/Put binary option. There is an automatically generated strike price and your goal is to guess whether the price of the underlying asset will end above or below this price when the option expires. If you guess the correct direction, the trade is In-The-Money, if you are wrong the trade is considered Out-Of-The-Money.
A well traded variation of the Call/Put binary option is the 60 Seconds binary option. Here we have the same rules and the only difference is that the option always expires 1 minute after you have opened the position. This binary option type is preferred by traders who enjoy dynamic trading that brings immediate results.
Binary options traders who search the maximum return on their investments usually choose One Touch binary options. The risk with this type of trade is significant but the payouts often get over 500 %. When trading One Touch binary options you have to predict whether the asset price will touch at least once the predefined price mark during the lifespan of the particular Touch option. The rate of the price at expiry is irrelevant to the outcome of the option and it can be below or under the strike price.
Another very interesting type of binary option is the Boundary binary option which is also known as In/Out binary option. Unlike Touch options, where the final value of the asset is not important, here the asset price has to stay within certain boundaries which are defined by two strike prices – upper and lower. It doesn’t matter how many times the price will leave the boundaries during the trade as long as it finishes within the range at expiration time.
With every type of binary options the trader can choose the commodities, currencies, indices and stocks that are provided by the particular broker on their trading platform. There is however a different number of underlying assets for every option type. As a rule you have the biggest choice of assets when you trade Call/Put binary options and a smaller number of available assets for the Touch and 60 Seconds binary options.
Finally, it is worth mentioning that most of the binary option brokers offer a special tool on their platforms, called Option Builder. It enables binary options traders to design their own binary options, by choosing the asset, the direction of the price, the expiry time, the investment and the desired profit/loss ratio of the binary option.