Types of Binary Options
There is the basic binary option which was discussed earlier; a trade based on whether you believe the price at expiry will be higher or lower than the current price.
There are also other types of options though, two in particular which seem quite popular.
Touch binary options are not based on where the asset price is at expiry, but whether an asset price touches a specific level at any time before expiry. With some brokers only one price is given and then you must choose between “Touch” or “No Touch” depending whether you think the asset price will touch the price in question before expiry or not
Other brokers offer two prices, and you can choose whether you think the price will touch the upper or lower threshold. Figure 3 shows an example of this.
Here we are looking at the Dow Jones. The expiry is at 13:45 and the current time is 13:39:46. The countdown clock shows there is only 14 seconds left to place trades, as most brokers don’t allow trades within several minutes of the expiry time.
This option gives you the choice of picking a “touch up” or a “touch down.” If you pick Touch Up the asset needs to touch 15438.246 in order for you to win. The return if you win is 210%–if you bet $100 you will receive $210. If the price doesn’t touch that level you will lose your $100.
If you pick Touch Down the asset needs to touch 15424.404 in order for you to win. The return if you win is 210%.
To win on the Touch Up you need to Dow to rise about 7 points within the next 5 minutes . To win with the Touch Down you need the Dow to fall about 7 points within the next 5 minutes.