Binary options offer you a great selection of tools to profit from any market situation. In general, there a four types of binary options you can invest in:
1) High / Low options
High / low options are the most basic type of binary options most new traders get first introduced to when they start with binary options.
In short, high / low options predict whether the market will be higher or lower after a certain time. Which time depends on the expiration time chosen by the trader. Expiration times usually start at five minutes, and can be as long as a few hours. Some brokers also offer end of the day expiration times, which means that you predict that the market has risen or fallen by the end of the trading day.
By investing in a high option you predict that the asset will trade at a higher price by the end of the expiration time than it does when you invest in the option. Conversely, by investing in a low option you predict that the asset will trade at a lower price by the end of the expiration time than it does when you invest in the option.
If your prediction is right, you will usually win around 60 to 70 percent of your investment, depending on your broker and which situation you invest in. If your prediction is wrong, however, you will lose the entire amount you invested.
Paired with the right strategy, high / low options usually allow you to win a high percentage of your trades. Their payouts, on the other hand, are significantly lower than with other types of binary options.
2) Touch / No touch options
Touch options are a more advanced option type. While high / low options require you to predict whether the market will rise or fall, touch / no touch options also require you to predict how far the market will move.
Touch options define a target price that the market has to reach before the option expires. If the market does reach the target price, you can win a high payout, usually 400 to 500 percent of the amount you invested.
Since the target price is relatively far from the current market price, touch options are hard to win. Still, traders that know how to find situations with high volatility can use touch options to make a lot of money.
The advantage of touch options over high / low options is that you will still win your option, if the market reaches the target price only once before the option expires.
No touch options are the exact opposite of touch options: They predict that the market will not reach a certain price before the option expires. Since no touch options are far easier to win, they usually feature a much lower payout than touch options.
3) Boundary options
Boundary options are similar to touch options. Instead of using only one target price, however, boundary options use two target prices: One above the current market price, and one below the current market price. Both target prices are equally far from the current market price, thereby creating a channel which prices have to escape for you to win your investment.
The payout of boundary option usually is somewhere between the payouts of touch options and high / low options, the exact value depending on the current market situation.
Boundary options are the ideal investment if you are expecting a strong price movement, but are not sure which direction the movement will be in. A situation like this often occurs before scheduled events, such as the publication of important economical data or a company’s annual report.
Often, you cannot be sure, whether the news will be good or bad, and how the market will react to it. All you know is that there will be significant news, and that the market will react to it in one way or the other. This is the ideal situation to profit from a boundary option.
4) 30 / 60 seconds options
30 / 60 seconds options are a special form of high / low options that feature short expiration times of 30 or 60 seconds.
While they work just like high / low options, 30 / 60 seconds options allow you to trade a lot of options in a short period of time, thereby also enabling you to make a lot of money very quickly.