The Binary Options One Touch Call is a type of barrier option where traders can profit if the underlying asset’s price touches or exceeds a predetermined strike price before the option’s expiry. Unlike traditional options, which require the asset’s price to be above or below the strike price at expiry, the one-touch call settles immediately at 100 if the price barrier is breached.
One Touch Call in a nutshell
- Profit if asset’s price touches or exceeds predetermined strike price.
- Risk consideration: Potential loss if asset price fails to reach the predetermined level before expiry.
- Impact of volatility: Implied volatility levels influence the likelihood of reaching the strike price.
How does the Binary Options One Touch Call work?
A One Touch Call works by selecting an asset and predicting whether its price will touch the specified strike price within a certain time frame.
- If the price does touch or exceed the strike price, the option settles at 100, securing profits for the trader.
- However, if the price fails to touch the predetermined level before expiry, the option expires worthless, resulting in a loss.
Are there risks with Binary Options One Touch Calls?
The one-touch call option may be an attractive option for traders, but it is not without any risks. One key risk factor is the possibility of the price failing to reach the strike price before expiry, leading to the loss of the investment. Additionally, the strategy becomes zero once the price touches the strike price, transitioning into a binary call option, which may limit further potential gains.
Another risk occurs when the position for a binary option, one-touch call, is extended while holding short positions for two binary call options. Failure to close the short call binary options at the appropriate time can result in losses if the strike price is breached.
What impact does implied volatility have on Binary Options One Touch Calls?
Varying levels of implied volatility can affect the probability of the strike price of the one-touch call being reached. Lower implied volatilities indicate a lower likelihood of the price reaching the predetermined level, affecting the overall risk profile of the option.
The Binary Options One Touch Call is a valuable tool for traders seeking to profit from market movements. Understanding and managing associated risks, such as implied volatility and risk reversal, is essential for optimizing the effectiveness of this strategy in trading activities.
For further insights into binary options trading and related strategies, explore additional articles in our Binary Options Glossary.
