Binary Options Contracts
Binary Options trading offers a range of trade types that can be utilized to profit from different price movement outcomes in a wide variety of financial assets.
These range from the traditional Higher/Lower options (known as the ‘Call’ or ‘Put’ in binary trading terminology), through to more complex trades that can be used to profit from different price movement outcomes. The return that is earned on the various trade types will vary dependent on the exact contract placed. To earn the payout the contract must end ‘in the money.’
It is important to note that not all types of binary options contracts are available from each broker. You should therefore check the contract types offered by the broker before starting. While you may not need access to all of the contract types available, you should be sure to check that the a particular contract is offered if your strategy requires it.
Here is a list of the various binary options trade types that you will find offered by the recommended brokers listed on this site.
High/Low Binary Options
These are the classic option contracts which you will find offered at all binary brokers. In binary options trading terminology these contracts are referred to as ‘Call’ and ‘Put’ contracts. The high low binary option pays out if the market finishes either above (Call) or below (Put) the strike price at the expiry of the option contact.
Example: The FTSE 100 index is at 5700 and you place a CALL option set to expire in 1 hour. You profit if the asset finishes above 5700 at the expiry time. A PUT option would profit if at expiry the market level finishes lower than 5700.
One Touch Binary Options
One Touch Binary Options are increasingly available. They allow you to profit from an asset ‘touching’ (or in the reverse setup ‘not touching’ a pre-agreed level prior to expiry. The binary options contracts are only made available by some brokers at the weekend. This allows you to speculate on the upcoming price movement of an asset the following week.
Example: Gold has been moving higher over the session and currently stands at $1848 per ounce. You place a Touch trade for the price to ‘touch’ $1850 over the course of the next hour. The option pays out the agreed profit provided the asset touches this level before the contract expires.
The No Touch option works in the reverse with the pay-out being made if the asset ‘does not touch’ the set level prior to expiry.
Boundary Binary Options
The Boundary option is similar to the touch option. As the name suggests it requires two levels to be specified by the trader, one either side of the strike price. The asset price must touch either the upper of lower boundary before expiry. If it does then the boundary binary option will yield the pay-out.
Example: Having reached $1850 over the session the gold price looks like it might consolidate. You place a boundary trade with a higher level of $1855 and a lower boundary level of $1845. If the market does not touch either level before the expiry then you earn the payout.