When chartists want to take a position based on touching, holding, and bouncing back to a support or resistance level, Up and In One-Touch Put binary options generally provide practical tools.
Knock-in-one-touch options, like knock-in binary calls and puts, can hold incredibly high return opportunities.
Up and In-One Touch Put Options allow the speculator to bet that the resistance level will hold and that, as a result, the underlying asset will fall back to the strike price before the expiration.
Properties of Up and In One-Touch Put Binary Options
A one-touch put that is out of the money almost always has a positive tunnel vega, which means that as volatility increases, so does the value of the one-touch put, which in turn increases the value of the knock-in that must catch the one-touch put at the barrier.
In addition, this increases the probability that the barrier will be touched. This is in contrast to the down-and-out one-touch call, which has a higher chance of being knocked out and ending at zero due to the higher volatility.
Waiting until the barrier is touched and selling the Up and In Put Options could be risky in case of a breakout, as resistance and support levels are often pivot points from which the underlying can move aggressively in either direction.
However, selling at the barrier could prove problematic if the resistance level holds and the Bunds quickly fall off it. By converting his one-touch put into a knock-in, the buyer of this binary options strategy automatically gets a short position in the market, so he doesn’t have to jump on a slumping market.
The knock-in portion of the up-and-in one-touch put is similar to a one-touch call. But here, the payout has been changed so that the winning price equals a one-touch premium rather than 100.
Vega decreases to zero when implied volatility increases. If implied volatility rises above an asset-dependent threshold, vega becomes negative because the strike limits the option value to 100. Since the probability of the underlying falling is greater than the effect of the underlying reaching the strike, rising implied volatility consequently has an unbalanced impact on the value of the binary call.
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