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Other Types of Binary Option Trades

Trading binary options is relatively easy even for traders with no prior experience. The most basic type of binary option trade is the call and put option where the trader predicts the price development of the asset being traded at the time of expiry. There are, however, several other binary options trading types that allow you to earn higher returns under certain market situations.

1. One touch trading

Almost all brokers offer one touch binary trading. One touch trading works a bit differently from other types of binary trades because under normal ordinary circumstances, binary option trades become profitable or not depending on the price of the asset at the time of expiry. With one touch trades, however, the price of an asset only has to reach a particular mark or touch level just once within a predetermined time frame for the trade to become profitable. Depending on the broker, returns for one touch trading can be between 65%-85%.

2. High yield options

Some brokers offer binary option trades with the potential for returns of as high as 250%-400%. However as you might suspect, these high yield trades have considerably higher risk than other trades with lower returns. High yield options usually have the estimated price far removed the actual development which lowers the chance of the trade finishing in the money. High yield options can nevertheless be lucrative in market situations where excessive market volatility and wild price fluctuations exist. For instance, when sensitive information is published about a company, it's normal for the share price to undergo dramatic changes sometimes in just a single trading session. If you have high risk tolerance, then consider trying high yield options.

3. Range trading

Some trading platforms offer a special type of binary trading called range trading. Depending on the broker, range trading is also called border or boundary trading. As the name implies, range trading focuses on the developmental range of the asset being traded. The trader predicts the upper and lower range of the asset price, and whether the price will be inside or outside this range. Some brokers combine range trading with high yield options. Traders who predict successfully can receive high returns that exceed 100%. Range trading can be lucrative during periods of high market volatility. But their main downside is that they involve a higher risk than traditional call and put options.

Additional Features for Risk Management

One of the reasons why binary options have become very popular in recent times can be chalked up to the fact that the risk is limited only to the investment. But many brokers have gone an extra mile by offering additional features to help manage the risk involved when trading binary options. These include:

  • Loss coverage
  • Early closure function
  • Roll over function

1. Loss coverage

Under ordinary circumstances, wrongly predicting the outcome of a trade leads to the trader losing their investment. Some brokers, however, offer loss coverage by returning 15% of the investment to the trader. Other brokers offer an 'Options Builder' function where they allow the trader to adjust the amount of money returned in case of an unfavorable outcome. The higher the loss coverage, the lower the potential returns and vice-versa. Loss coverage is a good option for traders who are less willing to stomach high risk but are willing to sacrifice potentially higher profits for a measure of downside protection.

2. Early closure function

Many brokers offer an 'Early Closure' function. This is a useful feature because it allows traders to close trades prematurely instead of having to wait for the trade to expire. Using this feature, traders can close trades early to lock in profits or to exit trades that are going against them. Unfortunately using early closure requires the trader to accept lower returns.

3. Roll over

The 'Roll Over' function allows the trader to extend the duration of their trades. This increases the chance of the trader finishing in the money, but at the cost of lowered returns. These three are just some of the risk management features offered by brokers to help traders minimize their losses when trading binary options. New options are being added to the market on a regular basis. Make sure that you keep yourself updated on new developments in this field.