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Major Types of Binary Options

Binary Options -Major Types

These are the most important Binary Options types that are available today for binary traders:

(1) Up/Down Binary Options

(2) Touch Binary Options

(3) Range Binary Options

(4) Pair Options

(5) Turbo or 60-Sec Binary Options

(6) Binary Options Builder

(7) Options Ladder


 

 

(1) Up and Down (Put and Call) Binary Options

Up or Down Binary options are the classic digital options offering two possible outcomes (win or lose). Traders may select either Up options for upcoming bullish markets or Down options for upcoming bearish markets. This type is also known as the Call / Put Options.

■ Move Up (↑) if a Bullish Market is expected

■ Move Down (↓) is a Bearish Market is expected

■ Payout Rate: 70-90%

■ Refund Rate: 0-15%

■ Time Expiries: from 5 minutes to hourly, weekly or monthly expirations

■ Features: (Full range of features supported, including Take-Profit, Rollover, Double-Up etc)

 

Basic Information about Up and Down Binary Options

Up and Down Binary options require from traders simply to speculate on whether the price of a financial asset will rise or fall in a pre-specified timeframe.

Case-1) If the Speculation Proves Right

If speculation is correct then the trader receives a payout. The payout amount is based on the Payout Rate:

Payout = Initial Investment x Payout Rate

For example, if the initial investment was $100 and the payout rate is 85% then the trader receives:

Payout = $100 x 85% = $85, so the profit is $85

Case-2) If the Speculation Proves Wrong

If the speculation proves wrong the trader lose its initial trade amount but he collects back a Refund amount which is based on the Refund Rate:

Refund = Initial Investment x Refund Rate

For example, if the initial investment was $100 and the refund rate is 10% then the trader receives back:

Refund = $100 x 10% = $10, so he is paid back $10

Binary traders using Up and Down Options can choose among a wide range of up to 200 assets, including Forex currencies, commodities, stocks and stock indices. In addition, multiple trades can be executed at the same time.

 

How you can Trade Up and Down Options?

Trading Put/Down options is very easy and includes just four steps as you can see in the graph.

Step-1: Pick an asset (Forex currency, commodity, stock or index)

Step-2: Choose an expiry (this is the timeframe of you trade from 5-minutes to several months)

Step-3: Enter an amount to trade (the minimum usually is $5-$10)

Step-4: Choose the Price Direction according to your speculation (Up or Down)

This is how you Trade Binary Options

Advantages when trading with Up and Down Options:

Maximum Trading Speed (the easiest type of option to trade)

Access to all Financial Assets (other binary options types don’t have access to all markets and assets)

Multiple Expiries (you can choose among short-term, mid-term and long-term expiries)

Multiple Trades (multiple trades can be executed at the same time)

Full Features Supported (Up & Down options is the most popular type of binary trading and therefore supports a full range of features including Take-Profit, Rollover, Double-Up etc)

Easy Strategy-Implementation (you can simplify your strategies using this type of options)

Disadvantages when trading with Up and Down Options:

Little space to maneuver (everything is fixed)

Can not modify money management (you can not change the Payout/Refund Rate as in the case of using an Option Builder)


 

 

(2) One Touch / No Touch Binary Options

One Touch Binary Options are becoming increasingly popular among binary traders as they provide extreme returns.

One Touch Options provide an extreme payout if the price of an asset reaches or surpasses a predetermined price barrier. The payout is paid once this price barrier is broken and the trader doesn’t have to wait until the expiry. This type of binary option is ideal for traders who forecast that the price of an asset will be extremely volatile in the near future (especially for News-Traders). One Touch Binary Options can be purchased only during Weekends.

Payout Rate: 300-550%

Refund Rate: 0%

Time: Purchased only during Weekends

Features: Only Higher or Lower speculation

 

Introduction to One Touch / No Touch Binary Options

This type of binary option can only be traded during the weekends when the financial markets are closed. The minimum trade is usually $25 / $50.

Definition of On Touch Options

Only two outcomes are offered when you trade this binary option type as in the case of the classic Up and Down binary options:

(1) If a certain price barrier is reached then the trader receives a pre-agreed payout.

(2) If this certain price barrier is not reached then the trade is simply lost.

The Difference between Touch / No-Touch Options:

One Touch Options

One Touch Options provide the chance of trading certain price levels. If the price of an asset reaches (touches) certain price levels during a pre-determined time period, then the trade gets paid instantly, before expiry. The payout rate is fixed and pre-determined as in the case of simple Up & Down Options.

No-Touch Options

No-Touch Options are profitable in the exact opposite conditions. That means that a trade gains a payout if the price of an asset remains below and above certain price levels during a specific time period.

The payout rate for this category of binary options can be extremely high and reach even 500% or more. How can any broker offer more than 100% payout rate? Any payout rate above 100% assumes that the likelihood of winning is significantly below 50%.

Note: The greater the risk of losing money the greater the potential return to gain.

One Touch / No Touch Binary Options Trading Hours

The trading hours for One Touch Options differ to other option types and can only be purchased 21:00 GMT-19:00 GMT Friday-Sunday.

The importance of Volatility when trading with One touch binary options

In contrast with other binary options types where you just have to forecast the price direction -When trading one touch options you need to be able to forecast two variables:

(1) Price Direction (higher or lower)

(2) Upcoming Price Volatility

You may measure volatility using several technical analysis tools such is:

Commodity Channel Index (CCI) » More on CCI

Average True Range Indicator (ATR)

An easier approach to achieve volatility is to select time periods of important news and updates. Most of the times during important news updates the price of the underlying asset (for example a Forex currency or a commodity) is characterized by extreme volatility.

How to Trade One Touch Binary Options

Here are some simple Steps to trade One Touch Binary Options:

(1) Select an Asset (Forex, Commodity, Stock or Index)

(2) Enter an Amount

(3) Select Higher or Lowe (the trade is executed instantly)

One Touch Binary Options Advantages

Extreme Payouts, up to 500%

Wide selection of assets

Touch Options can perfectly take advantage of high-volatility periods and Trending Markets

No-Touch Options are perfect for exploiting opportunities in Ranging Markets

Ideal for News-Trading (Important markets news and updates enjoy extreme volatility)

One Touch Binary Options Disadvantages

This type of binary option can only be traded during the weekends when the financial markets are closed

No Refund is paid if the trade is lost

Touch / No Touch options are not offering flexible trading conditions (for example they don’t provide the Take-Profit feature)


 

(3) Range or Boundary Binary Options

Synonymous Option Types: Tunnel Options, Boundary Options, In/Out Binary Options

Range Binary Options offer traders the chance of speculating if the price of an asset will remain within a predetermined price range during a specific period of time.

Payout Rate: 70-350%

Refund Rate: usually 0%

Time Expiries: usually 30 minutes

Features: Early Closure

 

Introduction to Range / Boundary Options

Trading using range options is all about forecasting if the price of an asset will stay in a certain price range for a given period of time.

Trading within two lines

In any Range Option chart, there are two basic horizontal lines which represent the upper and lower boundary of a range. If the price of the asset remains between these two price levels then the trade will be closed profitably. Range options are offered in multiple expiries starting from half an hour to daily expiries.

Extreme Returns

Along with Touch Options, Range Options offer the highest Payout Rates among all binary option type. As in the case of any other binary options contract, range trading consists all-or-nothing trading. If a Range Option contract expires out-of-the-money the trade is simply lost. But if a Range Option expires in-the-money, traders can achieve extreme returns up to 350% (High-Yield Boundary). Range Options are the ideal tool for trading strong Trending and Ranging Markets. Furthermore, they can be used effectively by news-traders.

As in the case of Touch Options, been able to evaluate market volatility is the key that can make Range Options trading profitable.

Early-Closure Feature

When you trade using Range Options you can make an early exit before the expiration date. In that way, you can ensure your profits, but of course, you will be paid a diminished return. Early-Closure is not available if the price of an asset leaves the range that you trade.

Two Types of Range/Boundary Options

There are two types of Range Options trading:

■ In-Range Trade

In-Range Trade is profitable when the price of an asset remains in a pre-determined price range during a specific period of time. For example.

■ Out Of Range Trade

An Out-Of-Range Trade is profitable when the price of an asset finishes out a pre-determined price range.

How to Trade Range/Boundary Options

Here are some simple Steps to trade Range Options:

(1) Select a Financial Asset (Fx Currency, Commodity, Stock or Index asset)

(2) Choose an Expiry Time (usually it is 30 minutes by rule)

(3) Choose Higher or Lower

(4) Enter an Amount and Click Buy

Range Trading Strategy & Technical Analysis

The best way to trade Range Options is by taking advantage of a range-bound market. Many technical analysis indicators can be used for this purpose. The most popular technical tools for detecting a range-bound market are Bollinger Bands and Parabolic SAR.

■ Bollinger Bands | » More about Bollinger Bands

■ Parabolic SAR | » More about Parabolic SAR

Range / Boundary Options Advantages

(1) Offering extreme returns up to 350%

(2) Taking advantage of volatility

(4) Ideal for trading Trending Markets / Ranging Markets

(4) Out Options can be used for News-Trading

Range / Boundary Options Disadvantages

(1) Narrow selection of Financial Assets and Expiries compared with classic Up and Down Options

(2) Some limitations after execution compared with classic Up and Down Options

 

 

 

 


 

(4) Pair Options

Options Pairs is a relatively new binary option type and not all binary brokers offer it. Pair options were firstly introduced in 2010 by StockPair.

Binary options pairs actually trade two different assets at the same time, once against another. In general, these two assets must belong to the same asset class but you can trade also a Stock against a Stock-Index.

Payout Rate: 70-85% (Fixed Pairs) / Up to 300% Floating Pairs

Refund Rate: 0-10%

Time Expiries: 1 minute to several months

Features: Early Closure

 

Introduction to Pair Options

Binary options pairs offer the same basic setup as Up and Down options with the difference that instead of selecting a direction, you select which of two financial assets will outperform the other in a specified time period.

There are two basic forms of Binary Options Pairs

Fixed Pair Options: The best performer in a Pair is determined by the performance from the time the position was opened until its expiry time. (Payout up to 85%)

Floating Pair Options: The best performer in a Pair is determined by the performance in a fixed predefined period. This period may be a single day, a week or a month. Floating pair options can offer extreme returns. (Payout up to 300%)

Example using Pair Options:

For example, you may trade Google share against the Facebook share. Where is the advantage? It is simple. By trading pairs, you can eliminate 100% the effect of the general market conditions. Let’s assume for example that you are optimistic about the upcoming Google’s Earning Report but you are afraid that Nasdaq Composite will probably suffer from bad investor’s psychology due to unexpected macroeconomic conditions. In that case, you can trade Google against another share, for example against the Facebook share. If your prediction is right then your trade will expire profitably no matter if the price of Google gets higher or lower than the current price. In our example, if Google’s share performs better than the share of Facebook your trade will end profitable.

■ Profitable trade if Google performs better than Facebook in a certain time period

■ Lost trade if Facebook performs better than Google in a certain time period

How to Trade Pair Options

Here are some simple Steps:

(1) Choose any pair of Forex Currencies, Commodities, Stock and Indices (check asset index below)

(2) Choose an Expiry

(3) Enter an Amount

(4) Select the Best Performer (the trade is executed)

Pair Options Advantages

(1) You can completely eliminate the effect of General Market Conditions

(2) Pair Options can minimize the trading drawdown rate

(3) Very easy to trade as in the case of Up and Down Options

(4) Risk Management precision

(5) Pair Options can be used a Hedging Mechanism of other instruments

(6) Wide selection of assets

Pair Options Disadvantages

(1) The Payout Rates are usually diminished compared to classic Up and Down Options


 

(5) Turbo Binary Options

Synonymous Option Types: 60-Sec Binary Options

Trading Turbo Options is the most speculative practice when trading the world’s financial markets. What characterizes this type of option is the minimal expiries. You open trades that last 60 seconds or even 30 seconds. This option type can also be seen as scalping world markets at a glance.

Turbo options are extremely risky and can prove profitable only for professional traders who are mastering directional markets. As concerns all the rest, it is better to avoid them.

Payout Rate: 70-80%

Refund Rate: 0-10%

Time Expiries: 30 seconds, 1 minute, 5 minutes

Features: Limited Use

 

Introduction to Turbo Binary Options

Turbo Options is a type of binary option which provides the ability to go long or short in tiny segments of time (even in 15 seconds expiration). As in the case of classic Up and Down options in order a trade to end profitably, the underlying asset must end in-the-money. That means that traders have simply to forecast the market direction.

Trading Turbo Binary Options is fun, but remember when you have fun you are probably losing money. As George Soros once said “Profitable investing is very boring”.

Turbo Binary Options Strategy

The rule when trading Turbo Options is very clear, you must Follow-The-Trend all the times. Financial markets tend to move directionally when the news hits the screen. Therefore trading this type of options can be profitable in cases of trending markets which usually emerge after important news and updates or after reactions from sensitive price levels (support or resistance).

How to Trade Turbo Binary Options

Here are some simple steps to trade Turbo Options:

(1) Select a Financial Asset

(2) Choose an Expiry (usually 60 seconds)

(3) Enter an Amount

(4) Select Up or Down (the trade is instantly executed)

Turbo Binary Options Advantages

(1) Easy to trade

Turbo Binary Options Disadvantages

(1) Extremely risky

(2) Vulnerability to uncertain market conditions

(3) High-frequency of options trading leads mathematically to lower profitability

(4) Limited Features are Applicable

 

MT4 Trade Signals Generator

 

(6) Binary Options Builder

Binary Option Builder offers traders the chance to create their own customized binary options contracts. The Options Builder was originally provided in the SpotOption platform and can be found today in various names.

The Option Builder offers the same features as classic binary options and additionally the ability of modifying the Risk / Reward ratio as it is explained below.

Payout Rate: 15-85%

Refund Rate: 0-80%

Time Expiries: Any timeframe

Features: Full range of Binary Option features

Introduction to Binary Options Builder

The Option Builder offers traders maximum customization when they set up their trades. Traders can build their own binary contracts from scratch. The great difference of this option type is the ability to modify the Risk / Reward ratio. For example, you can set-up a trade with a very large Refund Rate and a very low Payout Rate. This proves extremely important for novice binary options traders who can test their strategies and their skills in minimum risk exposure.

Options Builder Variables

Here are the variables offered by the Options Builder:

(i) Financial Asset

(ii) Expiry Period

(iii) Payout / Refund Level

(iv) Invested Amount

The Option Builder offers enhanced flexibility and full control of the overall trading process. The minimum trade allowed in most binary options brokers start at $25.

How to Trade using the Binary Options Builder

Here are five steps to trade using the Options Builder:

(1) Select an Asset (Forex, Commodity, Stock or Index)

(2) Choose any Expiry

(3) Enter an Amount

(4) Choose the Risk / Reward Ratio

(5) Select Direction Up or Down (the trade is executed)

Binary Options Builder Advantages

(1) Binary Trading is adapting 100% to personal profiles

(2) Outstanding risk management (Modifying Risk/Reward ratio)

(3) Can serve almost all trading strategies

(4) Applicable to a wide range of financial instruments

(5) Ideal for beginners (by setting a very large Refund Rate and a low Payout Rate)

Binary Options Builder Disadvantages

(1) The only real disadvantage is limited speed of trading

(2) Minimum trades usually start at $25


 

(7) Ladder Binary Options

Ladder Options is an Up / Down binary option type that enriches trading choices with many strike prices and different payouts.

Ladder Options can offer traders extreme payouts and that is why they are considered ideal for exploiting news-trading opportunities and high-volatility in general.

Payout Rate: 1%-800%

Refund Rate: 0%

Time Expiries: a few minutes to Daily Expiries

Features: N/A

 

Introduction to Ladder Options

Ladder options provide traders with a range of various strike prices and expiry times. In order a ladder binary option to end profitable, the price of the underlying asset needs to move beyond a certain price level (strike price) within a particular time period while it is active. The greatest the distance between the current price and the strike price the greater the Payout return. As you can see in the chart, the payouts can reach even 800% or even more.

Choose among Different Strike Prices

Common binary options contracts offer simply two direction-trading (up or down). In the case of Ladder Options, Binary Options traders can choose among several target levels (as you can see in the picture):

(i) Target levels above the current price

(ii) Target levels below the current price

Each different target level/strike price has its own Up / Down button and offers a different payout rate.

Steps to trade Ladder Binary Options

Here are the easy steps to trade ladder options:

(1) Select an asset

(2) Choose an expiry time

(3) Enter an amount to invest

(4) Select the Price Level to Trade and a Strike Price (up or down)

Straddle News-Trading Strategy when Trading with Ladder Options

Ladder Option Multi Direction Trading Strategy (News Trading and Straddle Strategy)

Let’s suppose that we trade the Euro against the US dollar (EUR/USD).

EURUSD is trading at 1.25433 (as seen in the picture)

There are five (5) ladder levels available and each price level offer two (2) strike prices (up and down). That means 10 choices in total (5x2).

When customizing ladder options, traders must first choose an expiry time. The rule is:

(1) The Longer the expiry the higher the likelihood of winning and the lower the payout rate.

(2) On the other hand, narrow expiries offer better payouts and less likelihood of winning.

Here is an example in a very short time frame using a Straddle (2-direction) strategy.

Let’s assume that today important news regarding European unemployment is expected to be released by the European Central Bank (ECB). The unemployment figures will be released in 4 minutes. Unemployment rates can highly affect the currency prices so high volatility is expected after 4 minutes regarding EURUSD. That is why we choose an expiry after 5 minutes.

As we don’t know if this unemployment update will be good or bad news for Euro we select the straddle strategy, which means take a position on both sides of the EURUSD market.

Currently, EURUSD (check picture) trades at 1.25433:

We place two trades (one up and one down)

1st Strike Price Above:

■ 1.25516 (560% payout)

2nd Strike Price Below:

■ 1.25332 (874% payout)

As you can probably understand, this is an extremely risky trade but if the unemployment figure is beyond expectations (far above or far below expectations) then one of these two trades can end in-the-money and prove very profitable. The other will end just-out-of-the money.

Ladder Options Advantages

(1) Offers high Payout Rates

(2) Can exploit trading opportunities emerging in high volatility markets

(3) Can serve News-Trading strategies

Ladder Options Disadvantages

(1) Limited Asset Index

(2) Limited Features

 

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Binary Options Types

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