Binary options are very simple investment vehicles. They provide you with only two possible outcomes: either the market will move up or down. Your job as a binary options trader is always the same – to predict whether the market price of a certain asset will move up or down.
Having said that, there are several different options that offer you all kinds of possibilities to make money in many different ways. Your prediction remains the same – either the market goes up or it goes down – but depending on timing, the size of the movement and comparisons between different assets, you
Simply put, the more specific your prediction is, the more money you can earn. Making a prediction that the price of an asset, let’s say gold, will go up by an unspecified amount over the course of a long time frame like a month, is relatively easy. Predicting that the price of gold will go up by exactly $1 within the next 30 seconds is much harder.
As a result, binary options brokers will pay you much more for correctly making the second type of prediction. In this article we will look closer at different types of binary options. We recommend that you read our articles about each one for a more thorough introduction to the subject.
Which types of Binary Options can you trade?
Simple binary options
The simplest form of binary option is the high/low option. This is the original form of binary trading. A high/low option (sometimes also referred to as an up/down option) simply asks you to make one prediction: will the price of a specified asset move up or down over the course of a certain time-frame, for example one trading day, but longer and shorter time spans are also available.
High/low options can also involve comparing currency couples. For example US dollars and the euro. You then predict whether the dollar will move up or down in value, compared to the euro over the course of a certain time period.
All binary options brokers offer this sort of option. Because it is not very specific it does not offer a very high yield – usually around 80 %. Because it does not involve very high risk, it is considered a relatively safe form of binary option.
Time limited binary options
Time limited binary options are simply high/low options that expire quickly. A very popular version is the 60-second option. As the name implies, this is an option that asks you to predict the movement of the market over the course of the following minute.
There are also 30 second options that expire within only half a minute. A great benefit of this type of option is of course that it enables you to make a great number of profitable trades during one trading session.
Advanced binary options
All binary options only have two possible outcomes: you either win or lose. They also all simply ask you to make one prediction: will the market price move up or down.
However, the brokers have developed several more advanced options. One of the most popular is the boundary option.
The boundary option asks you to predict whether the price of an asset will move outside of a predetermined price range – either above or below the current price level – over the course of a set time-frame.
The brokers will usually make this price range quite wide. This makes it difficult to make this sort of prediction. The difficulty means that boundary options entail high risk. And as always, high risk means high yield. At most brokers a successful trade on a boundary option is rewarded with a return of somewhere between 100 % and 200 % of the funds invested.
The most profitable and high-risk form of binary option is the touch/no-touch option. This sort of option asks you to predict whether the price of an asset will move above or below a preset price level.
The brokers set these level quite far from the current price, so these are high risk options. The rewards are therefore great: up to 500 % of your investment.