Types of options
Binary options are quite a young stock product that is recognized as the most efficient and profitable kind of trading in financial markets. Due to this type of stock trading, traders gained the opportunity to make a profit by speculating on rates of currency pairs, commodities, indices and stocks along with the professional market. At the same time, due to the use of fundamentally new terms of trading, income from trading multiplied, surpassing all known types of the exchange trading.
What is the main difference between binary options and other types of exchange trading?
Previously, trading in the financial markets suggested that the price of the selected trading instrument would make the maximum number of points. There, each point of the distance made on the quotes chart was equal to a particular unit of the price. Thus, if a trader bade $100, and the price made 50 points, their net income was $50. In this case it is unknown how long the deal was supposed to remain open on the market, because thanks to the flat, price consolidation and low volatility, the price could remain in the narrow corridor for a long time, bringing no money to the trader and eventually turning in the opposite direction.
Binary options are a new approach to trading. In this case, the number of points doesn’t matter. The main part is only a direction the quotes headed after the trade execution within a specified “lifetime” of the order. In some types of options, one point is sufficient to bring profit to the trader that can take them a week to earn in other types of trading. Thus, the binary options almost completely removed one of the main conditions of trading in the financial market – the number of points a financial instrument must make to bring profit.
When trading binaries, the profit is obtained only from the correct prediction of the price movement – the future direction of the vector of price movement before the expiry of the lifetime of the deal.
After the specified type of exchange trading emerged on the financial services market, the option trading was booming in popularity and received further development. Thus, the most popular and the most common types of binary options were born:
Classic options are options the development of option trading started with. The most popular type of binary options, where 1 point of the planned movement of the price in sufficient to bring profit. Profitability of this option is 70% to 100%.
Constructor options are a great opportunity to adjust the options trading for yourself, since this option involves setting of your own parameters for trading. Profitability of this option is 70% to 100%.
One-Touch options: this type of option assumes that the price reaches a specified level within a specified period of time. Thus, the trader only needs to specify the future direction of prices. The profitability of this option is 100% to 600%.
Range option is the option that requires you need to correctly predict whether the price will remain within a specified channel or vice versa will leave it within a specified period of time. The profitability of this option is 100% to 600%.
TURBO 60-seconds options are options for high-speed method of trading, where the expiration period ranges from 60 to 120 seconds. The principle of trading repeats the conditions for the classic options.
Paired options are options that have been created exclusively for trading synthetic financial assets, built by the ratio of quotations of several trading instruments. For example, EURUSD/OIL (currency pair/commodity), etc. Thus, the trader, who bids on a rise or a drop in the chart of the paired option quotes, is bidding on which financial instrument from the pair will be more expensive or cheaper.
Above/Below options are options for the price reaching or not reaching the specified strike levels. Thus, when trading this kind of options, the trader is bidding on whether the asset price reaches a specified level and goes beyond it or not.
Long-term options are type of options that were singled out by brokerage companies into a separate block due to their increased expiration dates. However, they are in fact similar to classic binary options, the condition for profit in which is a decrease or increase in the quotation price.
Forex binary options are options with the initially specified levels of take-profit (the required number of points to gain profit), and stop-loss (the number of points to bear losses). At the same time, the conditions of the contracts of these types of options contain no requirement for the option expiration. That is, the deal will remain open in the market until the price reaches the take-profit or stop-loss level.
Ladder binary options are options, where conditions specify a few strike levels to be reached by the price of the traded asset. At the same time, the profitability of the highest level (in a deal to buy) is the largest (about 600%), the lower than average profitability is about 400%, and the profitability of the next to the price is about 200%. Thus, when the trader is bidding on the rise of the option, they are bidding on the price reaching the nearest level, in the hopes to get 200%. However, if the price of the asset on the chart within the deal lifetime was much more active and reached the second or even the third level, the trader will get 400% or even 600% payment of net profit instead of 200%.
This way, there are no low-yield and low-performing types of financial trading today, as the binary options brought on a wave of change to the market, becoming a trendsetter and a progressive type of trading.
Which binary options are better?
Only the practicing trader can answer the question of which binary options are better. Why? Because virtually all of the listed types are highly efficient and profitable ways of trading on the financial assets market.
The choice between the binary options is best made depending on the trading strategies used by the trader.
So, for scalping strategies it is better to choose 60-seconds and classic options, which have minor expiration dates. For medium-term and long-term trading strategies, Range and One-Touch options are suitable, as well as Constructor options.
The simultaneous trading on the chart patterns will be more efficient with the classic options and Range options.