Other than the basic CALL and PUT options, traders can also apply the one-touch binary options strategy. This is a relatively popular strategy among beginner traders.
Understanding One-Touch Binary Options
Remember that in the basic Call or Put options trading, you are required to predict whether the price of an asset will close higher or lower than its initial opening price. In one-touch binary options trading, all that is required is for the asset to touch the strike price irrespective of whether the closing price of the asset is lower or higher than its initial price.
How profitable are one-touch binary options?
One-touch binary options have some of the highest payouts. It is common for some brokers to offer a payout of up to 300% or more. However, it is important to note that options that attract such payouts are typically risky.
The fact is it’s not easy to predict whether an asset will touch a specific price point compared to simply predicting whether the price of an asset will go above or fall below a specific strike price.
With one-touch options, you have a better chance of finishing in the money if the strike price provided is within a realistic range depending on the market conditions and price movement.
What to look out for when trading one-touch binary options
Long term and short-term trends can be helpful in determining whether a one-touch strategy is the most profitable to apply at any given time.
Trends are particularly helpful when trading options with expiry times that are one hour or more. Observing long-trends will allow you to determine whether the price of an asset has been on an upward or downward trend.
Trend analysis will enable you to make predictions that are more accurate and therefore increase your chances of profiting from touch options.
Another factor to consider is the typically long expiration times for one-touch options and what this means for your chances of ending the trade in the money.
One-touch options with longer expiry times have a strike price that is much higher than the initial price of the asset. You need to carefully consider whether the asset will touch the price point at least once within that extended period of time.
Finally, the other factor that impacts on touch options is the volatility. Volatility is particularly suitable when trading one-touch options because it nudges the price of an asset upward or downward.
To make the most of volatility, you need to understand the assets you are trading; when you monitor and understand an asset you are better placed to predict whether the price of the asset will likely move upward or downward.
In summary, the greatest advantage of one-touch options is that you only need to predict whether the price of an asset will touch a given strike price at least once within a specified time frame, for you to end the trade in the money.
Be sure to assess the level of volatility as well as short term and long-term trends to determine the possibility of ending in the money with one touch binary options.
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