Binary Options One Touch Put definition

Binary Options One Touch Put definition

The one-touch put binary option is a simple barrier option with some unique features.

For the instrument to settle immediately at 100, the underlying asset may only trade at or below the strike price. Unlike the European option, a popular variant of binary put options, the One Touch Put binary option is an American option.

The latter can be exercised at any time until expiration, while a European option can be exercised only at expiration. It is usually liquidated immediately, as there is no reason to wait until the end.

In the one-touch put binary option, unlike the European binary put option, there is no unclear range where the underlying is settled precisely at the time of the strike. 

Due to this feature, the price of a one-touch put binary option is twice as high as that of a European binary put option with the same strike price, implied volatility, and expiration time. Why? The binary put option is valued at 50 at strike, while the one-touch put is worth 100. If the binary put options were available for less than 50, one could profit at any time before expiration by buying the binary put option twice and selling the one-touch put once, and vice versa.

Find more articles in my Binary Options Glossary.

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