What are High Low Binary Options?
With High Low binary options you need to determine whether the price of the asset will be higher or lower at the time the option expires (ex: 1 hour or 1 day from now). This type of options is sometimes referred to as: high/low, call/put, or above/below.
How to trade a High Low Binary Option:
- 1. Choose an asset you wish to trade (ex: EUR/USD, gold, Dow Jones index, etc.)
- 2. Determine the ‘strike price’ (also referred as target price) – this is the price at which you purchase the option. The strike price is constantly moving until you place your trade.
- 3. Choose whether the price of this asset will increase (place a “Call”) or if it will decrease (place a “Put”).
- 4. Choose when you want the option to expire (ex: in 1 hour from now, 1 day from now, etc.).
- 5. Choose the amount you want to invest and place the trade.
Once you place your trade you need to wait for the expiry time, to see if the price of the asset is higher or lower, than when you purchased it. If your prediction was right (in the money) you will make a profit usually around 80% of your investment, or if your prediction was wrong (out of the money) you will lose all or a large part of your investment.
For example: Let’s say you wish to trade the EUR/USD, and you think the price will decrease in the next 1 hour.
The strike (target) price is 1.29358 at which you enter the market. You choose the time you want the option to expire, and you enter the amount you want to invest, for example $200. Then place your trade.
In the image below, you can see a line in the chart at 1.29358, below this line your trade is a winning one.
Once the expiry time is reached there are 3 possible outcomes:
- • The price of EUR/USD is lower than the strike (target) price – so your option was In the Money (ITM), which means you’ve made a profit! Since the return was 85%, with your $200 investment you’ve made a profit of $170. The payout will be $370.
- • The price of EUR/USD is higher than the strike (target) price – so your option was Out of the Money (OTM). Options that expire OTM typically have 0% return and do not offer any refund. In this case you will lose your whole investment of $200.
- • The price of EUR/USD is the same as the strike (target) price – 1.29358. As a result, you will bet back your investment of $200.