Up/down (call/put or high/low)
Up/down options are the most typical binary options. It is all about assessing whether the price is higher or lower than the initial price in a given time interval. For instance, if the gold price is at $1311,99 upon opening the option, and we assess that it will be higher than that after an hour, then we win if it’s at least $1312 after an hour. It does not matter if the price kept on changing within that hour, it’s enough that the asset’s price is higher than the initial price precisely after 60 minutes, even if it’s just by one per cent.
When we choose up/down options we should not play against the trend so that there is a better chance of winning and a lower risk of making a bad decision.
EUR/USD rate was 1,39361 upon opening. We estimated that it would be higher than the base rate after 15 minutes, so we chose a 15-minute up/down option. If it’s higher than 1,39361 after 15 minutes – we win, if it’s lower – we lose.
We see a winning option of BMW asset (equity market). The option was made at 14:01 for $100. We estimated that in 30 minutes, at 14:30, the share price would be lower than the initial price, so lower than 87.2350. At 14:30 the share reached 86.9250, lower than the initial price. The rate was 73% so we win $173, where $73 is pure profit.
Here we can see a lost $100 option in the currency exchange (EUR/JPY currency pair). It was estimated that the price for the pair at 11:20 would be higher than the initial price of $138.181. Unfortunately, at the time of expiry the line did not cross the white line indicating the initial price, therefore we lost $100. In this case, the broker did not offer any refunds.
Similarly to up/down options, it is necessary to choose a time interval first. The difference is that we estimate whether the price chart of a particular asset does or does not “touch” the level chosen on a chart in the time interval given.
In case of “one-touch” option it’s enough if the price chart crosses the level at least once in the time interval given. If it happens, we automatically win and we do not need to wait till the end of the time interval chosen.
In case of “no touch” option, the price chart can never cross the level chosen in the time interval given. If it never crosses the level, we win. To have a winning “no touch” option we need to estimate the projected result (not crossing the line) throughout the whole time interval chosen.
“One-touch” example: GBP/USD rate is 1,69629. We estimate that it will be higher than 1,69671 within 15 minutes. After 5 minutes the price is 1,69672. We do not need to wait till the end of the time interval, we have already won.
“No touch” example: GBP/USD is 1,69629 upon opening. We estimate that it will not be higher than 1,69671 within 15 minutes. After 5 minutes the price is 1,69672. We do not need to wait till the end of the time interval, we have already lost.
Example: “one-touch” option visualization
In the picture above the violet dot is the precise moment of opening our option, meaning the base rate of our chart. The dotted line is the level which needs to be crossed by the price chart in a time interval chosen so that our “one-touch” option wins. It can be higher or lower than the base rate. The green dot is the moment when the line crosses the price chart – the level we anticipate.
If that moment is within the time interval chosen, we can start celebrating. If our option expires before that or if we chose “no touch” option, we lose.
Short-term options are actually up/down options with a very short expiry date, meaning 60, 30 or even 15 seconds. Within just a minute we know whether an option wins or loses. On the one hand, we can quickly make many transactions, which may mean a quick profit. On the other hand, it’s extremely hard – if not impossible – to analyze the situation within such a short amount of time. Consequently, the risk level is very high and our decision’s success is largely reinforced by a strong market trend.
Here we see the statistics from an expired 60-second option. Opening time: 14:15. The option expired within a minute. We estimated that after a minute the price of USD/JPY currency pair would be higher than the initial price (124,507). Despite the fact that the options may seem almost identical, the result (124,508) is within our estimation, so we win. We invested $100 and after a minute we have $170 (70% profit – $70).
In/out boundary options, range options
As the name suggests, in/out binary options are about deciding whether the asset’s price chart in a chosen time interval stays within the boundary prices (“in” boundary options) or crosses them (“out” boundary options). Similarly to the “one-touch” option, it’s enough when it happens only once to win (“out” boundary options, does not matter if it’s the high or low level) or lose (“in” boundary options). An “in” boundary option is similar to the “no touch” option in that it needs to achieve the anticipated result throughout the entire time chosen (no crossing lines).
GBP/USD is 1,69629 upon opening. We choose the higher price range 1,69671 and the lower price range 1,69587. We set the expiry time at 15 minutes and invest €10. If we choose “in” boundary options and GBP/USD does not go higher or lower than the price ranges set within 15 minutes (higher 1,69671 and lower 1,69587), we win approximately 100%, meaning €10. If it goes higher or lower at least once, we lose €10. If we choose “out” boundary options and GBP/USD goes higher or lower than the price ranges set within 15 minutes (higher 1,69671 and lower 1,69587), we win. If it does not go higher or lower at least once, we lose €10.
Example: boundary options visualization
Below you’ll find an example of a boundary options chart. Two grey horizontal lines set the asset’s price range (1,29626 and 1,29725). Crossing them in the time interval chosen (red vertical line) causes our win (“out” boundary option) or loss (“in” boundary option). If we choose an “out” boundary option, we estimate that in a given time interval the price chart will cross the higher or lower price range. If we choose an “in” boundary option, we estimate that in a given time interval the price chart will not cross neither the higher, nor the lower price range. The second option may be very profitable (even a couple hundred per cent) if the price range is narrow, but the success of such an option is not very probable since it largely depends on a very stagnant market. For this option it’s advisable to choose currency pairs and markets where not much is happening.