And you bet a certain amount of money at your call. In binary options, you need to guess if the price of the security will be higher or lower after a certain period of time. Binary options are different than other financial instruments only in the way they implement trades and the final goal of a trade.

You could place a strike price on either side of the current price and see which way it goes. You choose two different strike prices in this scenario. If either strike price is reached during the expiration period, you win your trade. If you place your strike prices ridiculously close to the current price, your payoff will be too small to justify your trade—again, there’s no cheating the system. Double One Touch you can think of as a trade where you’re hedging your bets. If price consolidates instead of hitting one of your targets, then you will lose your trade. No broker is going to pay you for making a bet on something which is more or less inevitable. You might use this method when you expect price to break out but you aren’t sure in which direction.

Since you are bearish on the euro, you would sell this option. on Friday, let’s say the euro is trading at 1.2400. Assume you sell 10 contracts, and receive a total of $400. The binary option EUR/USD>1.2375 is quoted at 60.00/66.00. Your initial cost to sell each binary option contract is, therefore, $40 ($100 - $60).

With the one-touch binary option trade, the binary options trader selects a strike price above or below the current market price as well as an expiration time. The broker will offer him a payout percentage corresponding to his selection.

After tracking the price movement of EUR/USD for the past hour, the binary option trader believes that the price will hit $1.30 within the next 5 minutes and decides to invest $100 to purchase this one-touch binary option.

Currency binary options are often considered to be a form of online gambling on currency markets, rather than investing or hedging. Moreover, currency binary options tend to have rather short expiration cycles, lasting from days to hours, or even minutes. Unlike spot trading, you lose your entire stake if the binary option is not in the money (ITM) at the time of expiration. The premium on a currency binary represents the consensus odds that the strike exchange rate will be reached by expiration. To make any money, you have to be right well over half the time.

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