Trading Types in Binary Options | Binary Options

by FinanceVersity | Sunday, Jun 12, 2016 | 333 views
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Trading types

In this section I have compiled a clear list of all available ways of trading with Binary Options out there. As mentioned on previous pages, my personal preference would be a straight up hourly option with a simple “call” or “put” placed.

However, with many platforms out there and technology as always being updated improved and remapped, options and advanced options for us to trade are ever increasing.

High/Low

High/low or Up/Down style Binary Options are as simple as they sound. Most Binary Option platforms out there offer this way to trade with an expiry time frame of one hour.

So, what we are doing is speculating if the price of the asset will finish above or below the current price by the point of expiry. Traders in this case will first choose an asset to trade (FX/Stocks/Commodities/Indices), any asset that is chosen has it’s own unique payout percentage, then the trader will choose either a “call” (above) or “put” (below), once the trader has chosen a direction they then can decide on an investment amount (anywhere from $20 – $10,000) to trade it. Once the trade is placed the live price at that moment is then classed as the “strike price” (price at point of trade entry), the trader then needs to wait until the point of expiry to find out if they have won or lost the trade.

The main benefit of this trade is the simplicity and ease of use. Just one decimal point in the right direction will win the trade and obtain for the trader the full payout percentage on the money placed. Just remember, that one decimal place can also go the other way!

One Touch

A one touch option is a binary option that has a payout profile in which the investor can earn a significant returns based on the initial investment. The one touch option can have a return profile that is as low at 65% return on your initial investment, and in some cases a 500% return on your initial investment.

A “one touch” option is a binary option that pays off if the underlying asset reaches a specific level, by a specific time. For example, a “one touch” option could pay 180% if oil prices touch $105 dollars a barrel by the end of the week.

“One touch” options can be traded very profitably and there are numerous strategies that can be used to trade them to make very generous returns. However, trading this style option is all based on “implied volatility”, something which I completely detest! “One touch” binary options are priced using the same assumptions that are used for trading vanilla options. Therefore you can expect either massive wins or massive losses when trading them!

Barrier Options/Double “no touch” Options

Barrier Options or Double no touch options (also called “Range Binary” or “Double Lock Out” options) are a variation option that gives the investor a payout at expiry if the price of the underlying asset does NOT reach or surpass one of two predetermined barrier levels.

This type of option allows the investor the right to choose the level of the barriers, the time to expiration, and the payout to be received if the price fails to breach either barrier. Only two outcomes are possible with this type of option:

The barrier is breached and the investor collects the full payout agreed upon at the outset of the contract.
The barrier is not breached and the investor losses the full premium.
Talk about complex! As you can see the variables here are almost endless. Truly this is one way to trade where experience and discipline is key. Not for the light hearted trader!

Take Profit

An ideal tool for customers who are interested in locking in their binary option’s profit before an asset’s expiry time.

In exchange for a premium, a trader who is offered Take Profit can get the promised return on his option, before the original expiry time of his purchased binary option, irrelevant of the asset’s actual expiry level.

Take Profit is generally offered on certain options on particular platforms. I do like this option as there have been and will be times where having the ability to “take profit” ahead of time will look very attractive. The downside of course is that you are essentially saying to yourself that you do not believe you have made the right decision or trade and you need to run away before it all backfires! Never going to be good for that fragile trader psychology!

Roll Forward

Connected to Profit Take style options, “Roll Forward” is essentially a simple way for traders to postpone the expiry time of their binary option, to the nearest available expiry time.

In exchange for a premium, a trader who is offered Roll Forward, can postpone the expiry time of his option to the nearest available expiry time from the original expiry time. Roll Forward will be offered on particular platforms. Just like the “take profit” option I do like it as again there will be times where changing the expiry will be useful and financially rewarding. However, the premiums involved to do this normally counteract the actual purpose of doing it, leaving the trader most times out of pocket, where if he would have just left it as is, it may have just earnt profit after all! Again, all that is never going to be any good for that fragile trader psychology or the inflammation of trader ego!

60 Second Options

60 second trading is by far the fastest way to win and lose money within the Binary Option Market that I have seen.

A shortened version of the standard High/Low option, 60 second Binary traders can place multiple trades and positions based on a 60 second expiration. Most platforms that offer this style option will also offer a “Double Up” feature along with a styled “Protection Reuturn” on trades placed.

The “Double Up” feature is essentially similar to a roll forward or take profit scenario. For a premium in this case traders can choose to double up the placed position in turn opening the door for a higher return. Unfortunately again, once most traders get involved on that side they end up losing one way or another. Trading an aggressive 60 seconds is harder than it sounds, heart attack city in my mind! Anyway, a nice way to trade for those short on time and with a pair of brass golden balls because believe you me, it takes real guts to speculate on such short term movements!

Triple Options

This is where you can hedge your trades and execute up to 3 trades on a single asset.Not the most popular or well known way to trade out there but an interesting option in itself.

Not much to add here apart from if you as a trader get involved on a triple option, do bear in mind trading, hedging and executing all at the same time is definitely not easy but seriously profitable if you can get it right. Serious experienced traders only for this one!

Matrix

Another relatively unknown way to trade Binary Options. When looking at the Matrix style options I am heavily reminded of a Bingo screen! Seriously complex and confusing, this type of trade is where the trader predicts how much price change will occur inside a certain period of time.

Only a very small number of platforms will offer this option but do keep an eye out for it. Strange exciting and a little weird, with time I may just get my head around it!

Option Builder

An Option Builder allows you to implement the trading tactics that work best with your personal style and to take advantage of everything you know about the market.

Essentially allowing you to customize your trades by letting you set the exact expiry time and risk level, in addition to choosing which asset and how much you want to invest. begin with the basic decisions you make with any trade: Which asset, and how much you’d like to invest.

With an Option Builder, trades are not limited to standardized expiry times or risk levels. You can trade in the way that’s best for you, controlling your own risk and your own trading schedule to create the strategy that will yield the most and that my friends is a key part of the problem, and the main reason why I cannot stand these self styled “Option Builders”.

In my eyes, trading the market, recognizing the trends and placing trades is hard enough, let alone having to at all times figure out what my overall schedule is, my total risk appetite all the way to setting expiry times and insurance percentages and levels. However, should you be a capable, experienced and disciplined trader, it may just be the best thing since sliced bread for you! Personally I think the problem is most of us if not all of us get carried away and overreach without other thinking! Remember the basics and the results will come!

 

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