Double No Touch options are the exact opposite of double one-touch options. They are very useful for a trader who believes that the price of an underlying asset will remain range-bound over a certain period of time. Find here a complete guide to trading Double No-Touch Binary Options.
Steps to Trade Double No-Touch Binary Options
Double-no touch trading works in the opposite direction as double one-touch trading. In double one-touch trading, there are two trigger points above and below the spot price. To be in the money, you are expected to make a price movement prediction that will touch either of the two trigger points. The opposite is true for double no-touch trading — the predicted price movement should not touch any of the price points.
In double no touch trading, options feature two-trigger point below and above the price of the underlying asset. A trader would be out of the money or incur loses if he predicts that the underlying price will touch or go beyond the trigger points. On the contrary, you would be in the money and the trade would settle at 100 if the strike price goes above or below either of the two triggers.
When are double no-touch binary options most useful?
Traders commonly buy double no touch binary options when there is an anticipation that the market will consolidate after attaining a new high or low trend. Although beginners can leverage the opportunities offered by this type of binary options, double no touch options are better suited for advanced traders who have a solid understanding of consolidation trends and are comfortable trading volatility.
Double no touch options are especially efficient when it comes to selling and buying based on volatility. For example, if you were looking to sell volatility, you would buy double no-touch binary options instead of selling them. There is certainly a lot of risk involved in this type of trading but the strategy can offer lucrative returns as long as the strike price does not touch any of the trigger points.
It is worthwhile noting that historic volatility is largely based on past data while implied volatility is based on future date. Whether a trader applies historic or implied volatility when trading options, they can expect the price of the underlying to swing more than usual.
The double no-touch technique allows you to leverage a decline in implied volatility.
Double no-touch binary example
Here’s a quick example on how double no-touch works:
Say the EUR/JYP is trading at a rate of 1.3 and you anticipate that rate will remain the same over the next one month. A double no-touch option with trigger points of 1.28 on the lower side and 1.32 on the higher side will allow you to leverage the given situation. If the rate of the underlying price does not touch any of the trigger levels, you will receive a fixed profit payout. If the rate reaches any of the trigger points, the option will be worthless.
Overall, there is a chance of making a profit whether the rate of the underlying increases, decreases or does not go above or below the trigger points. Standard binary options that require you to predict the price movement of an underlying asset can attract 85% payout. But, double no-touch trading offers a much higher profit margin of up to 500% on correct predictions.