Trading Touch Binary Options
Binary options are becoming increasingly popular. This is because they are relatively easy to trade, once you get the hang of it. Additionally, there are different types of binary options that appeal to many different traders. One of the more interesting types of binary option is the touch binary option. In this type of binary option, you receive a payout if a strike price is reached, or “touched,” anytime between when you buy the contract and the expiry. The underlying asset doesn’t even have to end above the strike price for you to receive a pay out.
Touch binary options are very similar to auto insurance in a lot of ways. Most of us are familiar with auto insurance policies. Basically, you buy a contract for a premium. The promise is, that if you pay this premium, you will see benefits that are many time greater than what you paid in. If you pay $50/month for 6 months, you have paid in $300. When you wreck your $15,000 car toward the end of the 6th month, and you have coverage that replaces that amount, you essentially receive a return of $14,700 ($15,000 in benefits minus the $300 in premiums paid to that point).
With a touch binary option, you have the ability to get a large return for a smaller premium. Many touch binary options return up to 500%, if you are right. However, instead of seeing a strike event (an accident with insurance), there is a strike price. If you have an accident, your auto insurance pays out more than you put in. If you are right about a binary option, your profit is usually many times what you paid for the premium.
You have to be aware of expiry as well. Many auto insurance contracts expire after six months. If you haven’t had a strike event within that time period, you lose the premium. You can renew your policy, though, and pay a new premium. The same is true of binary options. You choose an expiry date when you buy your contract. If the strike price isn’t reached during that time period, you lose your premium. But you can buy more contracts for a new expiry period; many touch binary options are bought on the weekend, while the markets are closed, and then have a “term” that lasts the trading week.
Of course, there is the binary aspect of insurance as well. Many people don’t think of an auto insurance contract as a binary contract, but it is one. If the strike event doesn’t happen, you lose your premium. The same is true of touch binary options. If you predict that an underlying asset will touch a certain price, and you are wrong, you lose the premium you paid to purchase the option contract. But, in both cases, you know ahead of time the amount of money you are risking. The end result is the same: Get paid, or lose your premium.
Binary options are also like auto insurance in that it’s possible to size your bet. If you want a higher amount of coverage from your auto insurance policy, you need to pay a larger premium. The insured can choose how much coverage they want – how large of a pay out results from the strike event. With touch binary options, it’s possible to increase your return by increasing your bet. The larger your bet when you buy a binary options contract, the bigger your profits if you are right. You can essentially choose your potential rate of return.
Increased volatility is another way you can increase the value of your auto insurance policy – or your touch binary option. The more you drive, the more likely you are to have a strike event, and receive your pay out. With a binary touch option, the more volatile an underlying asset is, the higher your potential return. Paying attention to the risk involved can mean a higher pay out.
Trading touch binary options isn’t too difficult, once you get the idea of how it works. You have the potential to see large returns for the amount of money that you spend, and the results are fairly