What Are They & What Kind of Binary Options Are There?
Binary options are the latest and a increasingly popular trading product. Worldwide we notice a steep rise in the trend of binary options trading. On the supply side, we notice more and more binary options brokers starting to get active in the field. In case you have no clue as to what this new trading product is, allow us to explain more about binary options.
Basics About Binary Options
Binary options are a fascinating, relatively new trading product that allows traders with little to no financial knowledge to make money with trading.* There are many different types of options, but they all have a few important things in common. These are the basics about binary options.
All binary options trades are based on a future outcome. Whether it is a certain value, a movement in the price, a long term trend, a price range or another type of event in the future, whether you are in the money (= winning) or out of the money (= losing) is based on this future outcome.
Binary options are traded on underlying assets. The price or movement you are predicting, is based on the underlying asset. For example: you predict if the price of gold goes up, or the NASDAQ will stay within a certain range, or Apple stocks will perform better than Microsoft stocks. The binary options themselves are basically the trading product, and the underlying asset is the subject of the trade.
All binary options have to do as predicted (movement, trend, price range etc.) before or when the trade expires, depending on the type of binary options. Some options may do as predicted before the trade expires (e.g. Touch Up / Down binary options), other options must do as predicted at the moment the trade expires (e.g. Digital binary options). The expiry time signals the end of the trade.
At the moment a binary options trade is fully set, the trader knows the potential return of the trade. This is a predetermined percentage of the trading amount. At the end (the expiry time) of the trade, the trader either wins the predetermined return, or nothing. In some cases, binary options brokers (such as anyoption) offer the possibility of a partial refund or cash back for when a trade is out of the money, which the trader has to choose before the binary options trade starts.
*Trading Binary Options involves substantial risk and may lead to loss of all invested capital.
Types of Binary Options
Apart from the similarities mentioned above, there are a lot of different types of binary options available to the trader. Each type is very different from the other, which is part of the fun in the whole trading experience. Below you can read all about the various characteristics of all the different types of binary options.
Digital – The most common binary options are by far the Digital ones. These are also known as High / Low Binary Options or just Binary Options. The way they work is very simple: you predict that the price of an underlying asset will go up or down at the expiry time in relation to the time the trade is placed. Most traders trade this type of options. Usually when a trader (or sometimes even a broker) refers to ‘binary options’, they mean Digital or High / Low Binary Options. When trading these standard Digital options, the trader has to predict whether the price at the expiry moment will be higher (Call) or lower (Put) than the starting price. All our trusted brokers offer the standard High / Low binary options.
Above / Below – There is a high yield version of these binary options, called the Above / Below binary options. These are pretty similar to the standard type, only you have to not just predict the trend, but also if the price will come above or below a certain value. These binary options are a lot like the Touch type. The main difference is, that Above / Below binary options don’t expire when the predicted value is reached, but have to be above or below that value at the moment the trade expires. 24Option offers these Above / Below binary options.
Option+ – Option+ is not really a distinctive type of binary options, but more a simplified way to trade regular Digital binary options. With Option+, the trader has already set all the parameters for the trade. This way every new trade can be placed with only 1 click: up or down. Option + is an exclusive platform, only available to anyoption traders.
Touch – Touch binary options come in different shapes and sizes. The most similar types are the One Touch, Double Touch, and No Touch binary options, which are traded basically in the same way. But there is also a slightly different type of binary options, named Touch Up / Down.
One Touch – One Touch binary options are as widely available as Digital binary options, which means all of our trusted brokers offer them. The goal for the trader is to determine whether the price of the underlying asset will come (Touch) within a certain predetermined range at the set expiry time. One Touch binary options on average give higher returns than Digital binary options. Automatically, the higher returning options come with a higher trading risk.
Double Touch – Double Touch binary options don’t differ much from their One Touch cousins. The only difference is that the determined value has to be touched twice before the trade expires. More often than not, Double Touch will pay out more, but also impose a bigger risk on the trader than One Touch binary options.
No Touch – After explaining One Touch and Double Touch binary options, it seems pretty logical what the goal for No Touch binary options is: not touching the predicted price of the underlying asset. We recommend ZoomTrader for trading No Touch binary options.
Touch Up / Down – Touch Up or Down binary options are sometimes also sold as One Touch binary options. Touch Up or Down means the trade has to reach a certain limit. If it does, the trade automatically expires. If the value has been hit, the trade will automatically expire, even before the set expiry time. These Touch Up or Down binary options are best traded at ZoomTrader.
High Yield Touch – High Yield Touch binary options are just like regular Touch / No Touch options. Only, the bar has been raised, offering a higher return. But, as you have probably already guessed: there is a bigger risk involved. High Yield Touch binary options can be traded only at 24Option.
Range / Boundary – Range (or Tunnel, Boundary) binary options are especially popular in markets where prices show little movement and hardly any fluctuations. You have to predict if a price will stay between an upper and lower limit, or in other words: within a certain range. If the trade expires and the price of the underlying asset has never gone beyond the boundaries set for the trade, the Range of Boundary binary options are in the money. You can go to ZoomTrader, abcOptions or 24Option to trade Range or Boundary binary options.
High Yield Boundary – If you want to up the ante on your Boundary binary options, you can go to 24Option. At this binary options broker, you can trade High Yield Boundary binary options.
Turbo – Turbo binary options are very much like your standard Digital or High / Low binary options, except with one big difference: they expire very quickly. So if you are looking to make a quick buck, and aren’t against taking the corresponding higher risk, Turbo binary options might just be your thing! These fast options come in various forms. You have the Turbo binary options, which expire in either 1, 2, or 5 minutes. Also, there are 2 types that expire in 30 or even 15 seconds. These are often called Super Turbo binary options. These options are not available everywhere, but below we have stated per type of Turbo binary options where you can trade them.
5 Minutes – The 5 minutes Turbo binary options are the least volatile of the Turbo binary options type. Actually, 5 minutes is not that bad and is twice as fast as the fastest standard High / Low binary options can expire. Most of our trusted brokers have 5 minutes Turbo binary options.
2 Minutes – The 2 minutes Turbo binary options are a little faster. The time between the placing and the expiry of the trade is not even enough to cook a small microwave meal. You can read this as ‘fast money’, but beware of the increased risk involved. Like the 5-minutes brother, you can trade the 2 minutes Turbo binary options pretty much at any of our trusted brokers.
60 Seconds – The fastest of the regular Turbo binary options are the 60 seconds Turbos. If someone just told you dinner is ready, and you yell, “Just a minute”, you have literally given yourself enough time to trade these. Traders do love them, and that is why you can find these binary options at almost all our trusted brokers.
30 Seconds – The 30 seconds Super Turbo binary options are a little harder to find than the 60 seconds, 2 minutes, and 5 minutes regular Turbos. As you can tell by the name, they expire very quickly. In the time you trade the 60 seconds Turbo binary options, you can trade these twice. So you understand: these are not for rookies. You’ll have to visit abcOptions to find these 30 seconds Super Turbo binary options.
15 Seconds – If you want to trade binary options that expire almost literally in the blink of an eye, 15 seconds Hyper Turbo binary options are the trading product for you. It is as simple as placing a trade, and before you even consider waiting for the trade to expire, it has already happened. These Hyper Turbo binary options are only available at abcOptions. But beware: when we say they expire quickly, we really mean they expire quickly. If you had placed a trade before you started reading this paragraph (just the part below ’15 Seconds’) it would already be expired by now. Think about that before you start trading these extremely fast-paced binary options.
Long Term – Where Turbo binary options are at one end of the spectrum, you can find the Long Term binary options at the other end. We are not talking hours here, but days, weeks and even months. Set trades that expire in little under half a year from now if you like. These Long Term binary options are often used to spread the risk and are traded next to the shorter term binary options. If you would like to trade Long Term binary options, go to Banc de Binary.
Binary 0-100 – Binary 0-100 shows a lot of similarities with traditional Digital binary options, but with a little twist. Binary 0-100 allows you to calculate your own risk and get a corresponding return when the trade ends in the money. The return of the option is 100 minus the price you have paid for the option – hence the name binary 0-100. Sounds all a bit like jibber jabber? Well, it all works like this: you place a trade for, let’s say, 30 dollars. This is your investment. Your potential return is 100 minus the investment if your trade ends in the money. The rest of the trade settings are a lot like Digital binary options, so you choose either Up or Down and wait for the trade to expire. You can trade Binary 0-100 options at anyoption.
Pair Trading – Pair Trading is a bit of an outsider in the binary options trading world, but nonetheless a very popular trading method. With Pair Trading, the trader chooses not 1, but 2 different underlying assets. These 2 underlying assets have to be of a similar kind (e.g. BMW stocks vs. Volkswagen stocks). The trick is to predict which of these 2 underlying assets will perform better than the other. If the stock that you have chosen as the winner has the best position at the expiry time, you have chosen the correct winner of the pair and are in the money. Pair Trading can be very lucrative, and also high risk. You can find Pair Trading at Banc de Binary.
Special – In this section at anyoption you can trade binary options on Bitcoins and Alibaba. The Bitcoin, as you probably know, is a new type of electronic currency which can be used as a payment method. Alibaba js a Chinese e-commerce platform. Both underlying assets are only available for binary options trading at anyoption.
Which Binary Options Broker Is Perfect for You?
Now that you have learned about all the types of binary options, it is time to pick a binary options broker that is suitable for you. Which of the many brokers you consider to be perfect for you, is a personal choice. It all depends on the specific characteristics you are looking for in a binary options broker.
For your binary options broker, we do advise you to look at our Trusted Brokers. These are brokers with long and outstanding track records, which have been around for quite some time. You can also look at our article on binary options brokers to see at which ones you definitely shouldn’t sign up.
Go to our Trusted brokers>>
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