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Binary Options Types

Binary Options Types

FROs or Fixed Return Options are otherwise known as binary options / digital options / financial betting and under this option, the amount to be returned to the trader is fixed. All that the trader needs to do is to predict the direction the price of the instrument or asset will move to and has to make calculations if the price will be shooting up or climbing down after taking a careful analysis of all the factors determining the price. The binary option is said to be one of the most favored and simple methods of trading since the traders are aware in advance about the profit or loss they would incur and the risk is less.

Any trading type will have two (2) options: “call option” and “put option”. Call option is the right the trader enjoys for getting a contract for an amount that is determined in advance. The put option is the right the trader will get for making a sale of the contract at an amount that is again finalized in advance.

Binary option has got many types and each type is distinguished with the help of a few conditions which make the option valid or invalid. The payout amount that is to be finalized by the trader and when all the conditions of the trade are completed, the trader will be getting the amount that is specified in the contract. There are many types of binary options such as

The One Touch option where the trader agrees that if the asset or currency is able to be traded upon at a given specific rate, then he would be getting the profit that is again set in advance.

The rate at which the currency is traded is called the trigger. When the currency is able to reach the trigger value, the trader will get the specified payout amount. Thus the trader is quite knowledgeable about the amount he would be receiving in case of the currency reaching the trigger or the loss he would be incurring in case of a failure.

The next option is No Touch under which the trader undertakes to claim the profit only when the currency rate reaches the trigger as specified in the contract within the time frame set in the contract. The trader needs to note that if the trigger is much higher, then there is every possibility of the currency not reaching the trigger and he would incur loss or less profit.

The Double One touch option is where the trader is permitted to fix two triggers for the currency and if either of the trigger is reached, the trader gets the profit. This option is availed only when the trader is very optimistic about the market showing an upward trend but is not very sure which direction the market would move. The Double One touch option is almost like the long straddle option or the strangle option available.

The Double No Touch option is exactly the opposite of the double one touch option. Here the traders would assume that the currency would not be able to reach any of the two triggers that they fix. When the market is not very encouraging, this option is taken by the trader. The option works out profitable when there will be a move towards consolidation in the market.

There are many tactics that the traders apply for earning good profits in trading and often they look for combination of various options for earning good profit and less risk.

There are also claims by a few traders that many other methods with less risk have been developed by them but most of the traders treat the options in trading as a means of securing their money.

There are a few classifications of binary options. The main classifications are “cash or nothing” option and the “asset or nothing” option.

The “cash or nothing” option has a fixed amount as payout which the trader will receive in case the trade is a success and he will not get any money in case of failure. The Asset or nothing option is also the same as “cash or nothing” option and here the value of the security is paid to the trader only when it is a success.

Yet another type of binary option is the one based on the method of trade as performed in American method or European method.

Under the American method, the trading option will be brought into effect when the security price reaches the strike price.

When the trader opts for European method, the option is announced only when the time is over and the price of the security will be put into comparison with the strike price only after the time specified. The trader will not be able to claim any amount in case of getting the strike price ahead of the time specified.


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