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Down and in binary call options are speculative instruments. They are, therefore, particularly suitable for traders who want to make profits using binary options trading strategies when trading with a binary broker.
Features of down and in binary call options
The knock-in profile and the binary call profile intersect at the barrier. When the barrier is at a critical support level, it provides an effective tool for chartists to support their view that the level will hold and the underlying will bounce off it.
As the time to expiration approaches, binary call options increase in value as the probability increases that the financial instrument will be above a certain threshold at expiration. However, this requires that the knock-in also increases in value since at the barrier, the binary call option and the knock-in must have the same value.
The attraction of this asset, therefore, lies in the yield offered.
Other properties of down and in binary call options
A binary call that is out of the money almost always has a positive call vega, which means that an increase in volatility will increase the value of the binary call. The barrier is also more likely to be touched when volatility is higher. In comparison, the binary call has a greater chance of succeeding when the underlying volatility is more elevated. In contrast, with the knock-out, higher volatility increases the likelihood that the binary call will be knocked out and end up at zero.
Read more important articles in my binary options glossary.
