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Binary Options Trading Models

Author Zizzur Staff. Published on August 20, 2011 - 8:04 pm (472 views — 403 words)

Binary options trading is a form of option which consists of traders that call on whether the value of a particular asset will increase or decrease in a set amount of time. If the investor correctly predicts the movement of the asset, he or she will receive a fixed amount of return. On the other hand of the trader fails to do so, he or she gains nothing at all. This is why it is termed as binary options trading, because there are only two only two possible conclusions to this situation. Binary options trading is also called as Fixed Return Options (FROs), digital options, and all-or-nothing options.

Binary options trading has different for which are utilized in various markets and trading platforms. One of these models is the cash-or-nothing binary options trading. This is probably the most commonly used model in binary options trading wherein the trader purchases a contract for either a Call or a Put. A correct call will be paid a fixed return, usually around 170% and 200% of the stake. If the trader made the wrong call, he or she loses their stake, although at times, 10% to 15% is returned.

Another type of binary options trading is called the “assets-or-nothing binary options”. This form of binary options trading is almost the same as the cash-or-nothing binary options. However, the value of the return is not based on the stake but rather by the worth of the underlying asset.

Meanwhile, there is also what is known as the one-touch binary options trading. In this kind of binary options trading, the contract is finished once the asset’s value “touches” a pre-arranged amount, thus its name. The investor has to bid whether the asset value will reach that amount during the length of the contract. The converse of this kind of binary options trading is the “no-touch binary option”.

Last but not the least, there are the double-one-touch and double-no-touch binary options trading. These types of binary options trading follow the same concept of the one-touch and no-touch binary options trading. However, the double-one-touch and double-no-touch binary trading is more complex as it employs two values instead of the just one.

These are the main binary options trading models that are used today. Although numerous people regard this form of option as a gamble, this types of investments actually gives you the capability to estimate the risks that are involved.