When binary options first appeared, it was clear that they are simple to use and very comprehensive for everyone, regardless of their degree of experience and knowledge.
As the name itself suggests, the types of options are binary i.e. they go in pairs. To explain it even further, this means that there are only two possible outcomes.
We will take a look at all of the (most common) binary options types and make everything clear for you.
- Learn more about binary options trading:
- CFD vs traditional stock trading
- How to choose a reliable Forex broker in Thailand
- 4 stages of becoming a successful digital options trader
- 5 the most popular technical indicators for digital options
The High/Low option is the most frequently used type of binary option which you can find on all platforms.
Basically, what you need to do when selecting this option is whether the price of a certain asset will go up or down by the end of the expiry period compared to the current price of the asset.
As you can notice, there are only two possible outcomes from this scenario.
The most important variable in this case is the expiry time. The expiry time usually ranges from 60 seconds up. Some brokers set their expiry times, while others let you choose the expiry time yourself. In the most of the cases, the expiry time ranges between 15 minutes and several hours.
Clearly, if at the end of the expiry time the price of the asset goes up, and you have put your money on the High option, you are a clear winner. If, on the other hand, you chose the High option, but the price of the asset goes lower than the original price, it is a clear loss and you will lose your investment.
One Touch/No Touch
One Touch/No Touch binary option is a type which totally defers from the previous High/Low type. The point in this type of option is to predict whether a certain asset will reach or not a certain price at any moment before the expiry time.
The trigger point can be anywhere and at any time, the important thing is to have the asset “touch” the certain price, or don‘t “touch” it if that is what has been selected.
In a case when the trader is in a win situation, the reward will depend on how “predictable” the outcome was. If the point is easier to reach (or miss), then of course, the reward will be lesser.
If, on the other hand, it is not clear whether the asset will touch the point or not, then the potential reward will be higher.
Pair is a binary option type which allows you to predict which asset will have a higher value by the end of the expiry time. For example, let‘s say there are assets A and B.
You say that by the end of the expiry time, asset A will have a higher value than asset B. If by the end of the expiry time asset A indeed has a higher value than asset B, then congratulations – you won!
If you are out of luck and said that asset B will have a higher value, then you will lose your investment.
While with High/Low option, you were supposed to predict the direction which the price will go in, with Boundary or Range, you are able to set the values within which the asset‘s price will go.
You are supposed to set two trigger points: the minimum and the maximum. These trigger points are those values which the asset mustn‘t reach at any time, in order for you to make money.
Clearly, the risk will be lower if you choose a wider range in which the asset should stay in. Consequently, for a narrower range, the reward will be higher.
Long Term/Short Term
All binary option times have their expiry time, and with this binary option, you are able to limit that time to whichever works the best for you. Short Term trades, naturally, are made in order to win fast (or lose fast, of course). The timeframe of such trades can last from as short as 60 seconds, to several minutes.
On the other hand, long term trades are for those you would like to have some time on their hands and watch the story unfold. Long Term trades can last from as low as few days, to up to several months.
However, every trader should keep in mind that the market can change many times over a course of several months and that it may be harder to predict correctly in such case.
There are many binary option types which traders can choose from. All of these are made for the traders to have their options open, and do the trading as they wish.
If you found these options easy to wrap your head around, check out what the binary brokers offer, and you will discover even more unique types of binary options which brokers have created for traders!