As the binary options market has grown, so have the demands and needs of traders. Experienced clients request options similar to traditional Rise / Fall binary options , but allow trading on market volume and volatility. Brokers are also interested in offering products that can be traded in a flat and volatile market.
From here the ” Touch / No Touch ” option was born, which allows limited risk trading on volume and volume.
Touch Options Explained
The ‘binary’ element of One Touch options remains, as does limited risk. For the “Touch” option to settle the money; the value of the asset must touch, or exceed, the barrier (or ‘target’) level at least once before the option expires .
The “No Touch” option represents the opposite – the value of the asset will not touch the barrier (or ‘target’) level at any time before expiry .
In most cases, the barrier level is set by the broker. At certain brokers, traders can set a barrier. It may be higher than the current asset value, or it may be lower. The distance between the current asset value and the target price will generally determine the payout structure. These images represent successful Touch and No Touch ;
A significant difference with the Touch option, is that it can settle “in the money”, before the time runs out. If the Touch target is met, the option will be paid immediately, regardless of what happens to the value of the asset afterwards.
Broker differences
Traders who want to use Touch options should pay special attention to their trader options. First, some brokers don’t offer it at all.
Touch options on certain brokers are not very flexible. Nor is the target level. However, there are some brokers that offer a lot of flexibility. Here, traders can set their own target levels (payments are adjusted accordingly).
This offers a great opportunity to use advanced trading techniques. Setting Touch options at various intervals to control risk and return can ensure a trading edge. Traders can also set targets above and below the current value, creating “tunnel” options.
When to use the Touch option
Advanced traders will be able to use One Touch options successfully throughout their trading day, others may be experts. For example, market volume and volatility may be expected to change significantly after the release of certain data or events.
Likewise the market can run flat for the period leading up to the announcement – and become volatile after. If a trader feels that trading volume will be very low, or especially high, then the Touch option allows them to take a position on that view.
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