Binary option trading modes – an overview

In this section the different types of binary options are explained. Besides the classic call/put-trade most brokers offer further trading modes on their trading platforms. One the one hand, this represents attractive return opportunities for traders and on the other hand allows for the application of certain trading strategies that can fit particular market conditions.

One touch-options

Almost all binary option brokers offer so called one touch-options. In contrast to classical binary options trading where the trader buys a call or put option on rising or falling prices according to his interpretation of the market situation, a specific price target or “touch-level” has to be reached at least once during the option period that the trade is completed successfully and the option expires in the money. The possible returns range usually between 70% and 85%, depending on the broker.

Higher returns with high yield-options

Some brokers offer the one touch mode also with significantly higher returns of 250% -400%. According to the principle that higher returns always imply increased risks, with high yield-options the one touch-target is usually a lot more difficult to reach than in conventional one-touch trading. Therefore, the likelihood that these options expire in the money is a lot lower than with conventional one touch-options. However, the extraodinary high returns may very well compensate for that.

Especially in highly volatile market phases, for example in the context of strong market-influencing news events, high-yield options are an interesting way to disproportionately benefit from increased volatility. A useful trading approach that utilizes high yield one touch binary options is presented in our volatility strategy.

Range trading

Often on binary options trading platforms one will encounter the “range”- or “boundary”-mode. With these options, the trader determines whether the price of the underlying at the end of the option period will be within or outside of a specified price corridor. This price range or simply “range” is defined by corresponding upper and lower price limits.

Should the trading decision prove to be correct, returns between 70% and 85% should again be achievable. Also, the “boundary” – or “range” trade is often offered in conjunction with the high yield-mode, so that very high profits of several 100 percent are possible.

Additional functions for risk management

Basically, the risk in binary options is limited to the initial stake chosen by the trader. Often brokers offer a refund of up to 15% repayment in case of a loss or in other words, when the binary option expires out of the money. In order to manage risk more effectively, traders can utilize additional functions, such as the so-called “Option Builder”, where risk and return may be adjusted more flexibly. In addition to the option period, traders may also choose their preferred rate of return, which is adjustable depending on the guaranteed repayment in case of a loss. Thus, risk-averse traders may accept a lower return and therefore receive a higher repayment as a hedge against a loss.

Early closure and roll over

Furthermore, limiting risk is possible with additional trading features like “early closure”. Thereby, positions may be closed before the end of the option period to secure existing gains (e.g. when the option is currently in the money). In contrast, the “rollover” feature is aimed at extending the option period to allow for more flexibilty.

Other trading modes and special features

With the increasing number of binary option brokers the variety of available trading modes and additional trading features is constantly increasing. The team of will of course keep you up-to-date, always presenting the latest trends in the industry.