Monday, December 3, 2018

Types of Binary Options Transactions

Binary Options (BO) can be said as Fixed Return Options (FRO) because the amount of payment is fixed and predetermined. What traders need to do is just determine the direction of price movements of the selected asset types (commodities, stocks, forex or other) without considering factors such as stop loss level, risk / reward ratio, and so on.

Therefore, binary options are considered to be the simplest type of trading. Because the amount of payment has been determined, the trader only focuses on the possibility for profit or loss at the agreed risk. This is what makes BO popular fast.

Type of Binary Options High / Low
As the name implies, high / low allows traders to place options according to the expected up and down prices. This type is the simplest and most common BO traded especially for beginner BO traders. To transact, traders determine the direction of price movements (up or down) at the agreed time (expiration time). If the price is expected to rise, the entry position trader will choose 'High' or 'Call' option, while if it is expected to go down the trader can take the 'Low' or 'Put' option.

Based on the determination of profit and loss, this type of transaction is divided into 2 categories, namely:

Cash or Nothing

If at expiration (expiration of the expiration time) the trader estimates correctly, or in the money, then the trader will get a profit as large as previously specified. The terms of the return for each broker are different, usually between 65% and 80% of the funds invested.

But if the trader estimates wrong, or out of money, the trader will experience a loss in the amount of funds that have been invested. In this case there are brokers who repay 10% to 15% of the funds.
So in this type of binary options, traders do not need to worry about the price level exactly at the expiration time, only higher or lower than the agreed strike price.

Asset or Nothing

In this type of high / low transaction, the amount of profit can be more flexible because it is not fixed according to the predetermined one. Traders who are in the money will benefit according to the last price level when the expiration time arrives. So to say, this type of binary options has a similarity to the forex trading profits that are determined by the large price changes.

Interestingly, the loss calculation on an asset or nothing system is not determined according to the price level when the binary option position is closed. No matter how big the price changes are, the direction does not match the position, the loss will not exceed the investment size. In other words, a type of binary options asset or nothing allows traders to reach unlimited profits with limited risk of loss. Unfortunately, this convenience is not commonly provided at binary brokers who offer more cash or nothing systems. The model of determining profit such as asset or nothing is more widely used in vanilla options.

Type of Binary Options Touch / No Touch
In this type of binary options, traders determine a certain price level, as a target that can be touched (Touch) or untouched (No Touch) before the expired position. For example, EUR / USD is currently moving in a bearish trend in the range of 1.3600 - 1.3500. If you expect the pair to be bearish, traders can open the No Touch option with a target level of 1.3700. Conversely, when a trader believes that before the price expiration time will touch 1.3550, then he can choose the Touch option with a target level of 1.3550

Determining the amount of profit and loss in this type of transaction follows the principle of cash or nothing. If in the money will get a profit according to the predetermined one, but if the out of money will suffer a loss of a large amount of funds invested in that option. If you take the Touch option, the status in the money is when the price can touch the target level before the expiration time arrives. On the other hand, the position will be out of money if the price has not touched the target at the expiration time. The opposite applies to the use of the No Touch option.

Double Touch / No Touch

This type of binary options is not much different from Touch / No Touch. The difference is that traders need to determine 2 price levels as targets. If you expect the price to touch two specific levels, the trader can choose Double Touch. While if you predict the price will not touch two specific levels, then the Double No Touch option can be a more appropriate option.

Type of Binary Options In / Out of Boundary
Another quite large number of binary options transaction models provided in brokers is In / Out of Boundary. Basically, this type of In Boundary is perfect for users of sideways strategies that use resistance support. Why is that?

To be able to open the In Boundary option, the trader must determine 2 levels which are believed to be the upper and lower prices. If the price is not able to get out of the boundaries (In Boundary) until the option expires, then the trader will be in the money and get profit according to the set profit. If later the price exits the targeted limits, then the position of the trader is out of money, and he will experience a loss in the amount of funds invested in that position.

On the other hand, the Out of Boundary option is opened in the same way, namely by determining 2 levels that form a range or boundary. But the determination of in the money with this type of binary options is different, because the new trader will profit if the price is out (range) when the option expires. With dekimian, the Out of Boundary transaction type is the opposite of In Boundary, and is more appropriate for use in the breakout strategy.

Example of opening an In / Out option. In the picture above, the trader chooses the Out of Boundary option.

read toSimple Strategy for Scalping
Type of Turbo Binary Options
Turbo trading is basically the same as High / Low, but has super short expiration time coverage. Usually, the choice of ending options is no more than 1 hour. The lowest expiration time for Turbo binary options can reach seconds, such as trading in 60 seconds or even 30 seconds. This type of transaction is considered high risk and is not commonly offered at binary options broker-brokers.


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