Binary Options One-Touch Explained
One-touch binary options are popular among traders for their profitability—but they're also risky.
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Can you see the future—or predict it at least? 🔮
Both these skills would be invaluable whenever you dabble in binary options and perhaps more so than ever when it comes to the one-touch variant. This variety asks of you not only to figure out the direction the price of a security will take but also the pinnacle.
Even disregarding the warnings of fraud within the binary options issued by the FBI, the stock market can often be rife with uncertainty or sudden changes—market trends shift, Reddit users create tectonic shifts through the power of mass investing, CEOs die…
With all these factors making it very hard to predict future market prices—and lacking a reliable oracle—you’d have to wonder why anybody would decide to essentially bet against people who probably know a lot more about the market than they do.
The answer, as is often the case, is that the returns can be great for comparatively little work. And while that could be considered the mindset of someone going into a casino, binary options are not regarded as gambling—in the US at least—and with the right strategy it is more than possible to win this game.
So, let’s take a look at what one-touch binary options are exactly, what their main sub variants are, and how you can make the most of them.
- What are One-Touch Options in Binary Trading?
- Binary Options One-Touch Strategies
- Why Trade One-Touch Options
- Tips for Binary One-Touch Options
- Conclusion
- Start Trading Binary Options with a Broker
What are One-Touch Options in Binary Trading? 💭
One-touch, just like other binary options, represents a trade with only two outcomes—win, or loss. This means that when you buy a binary option you also make a prediction about the future of a certain stock in hopes of getting a fixed reward for being right, and losing the entire investment if you are wrong.
One-touch options expect you to predict the price certain shares will reach and the date by which this value will be reached. Most of these trades are done in an over-the-counter (otc) way and, at least in theory, the broker agrees on the terms with the investor.
In practice, however, in almost all cases the broker simply lists its one-touch options and it is up to the investor to either accept or avoid them. This means that the platforms choose the price, the payout, the expiry date, and the targeted stocks.
The Ingredients of a One-Touch Option 🤔
Whenever you go for a one-touch binary option you have to make a fixed investment for a fixed profit—for example, $70 could net you $150 and you can invest, say, $700 would get $1500 provided you made the right decision.
This right decision is with regards to the price changes of certain securities—stocks, ETFs, commodities, currencies, etc. For example, you see that shares of company X are valued at $64, however, you believe its stock is undervalued and should be worth $70. Thus, you go to a broker and purchase a one-touch option for $40—if you are correct you get $100.
But wait, you say, there is a very high likelihood that any stock sitting at $64 will reach $70 at one point or the other wouldn’t that make these options very lucrative for the investor and very bad for the broker? This is where expiry dates come into effect.
Whenever you purchase a one-touch option it has a time limitation—using company X again, their shares would have to go from $64 to $70, for example, within a week for you to get $100 (which leaves you with a net of $60), otherwise, you’d lose your investment.
First Outcome: Win 🏆
So, if you did choose to buy the one-touch option for company X, on the first of the month for convenience sake, the price would have to reach $70 before the 7th. In this outcome, everything is quite straightforward—the target price was reached in the timeframe so you get to collect $100 for every $40 you invested—after paying some, usually trivial, fees if you are with a leading binary options broker.
However, some brokers allow you to bail out of the deal early if it looks like it is going badly to minimize your losses. So, the shares of company X might have taken a plummet around the 3rd, or 4th causing you to panic and sell prematurely. You would have suffered a loss, though not as big as you would’ve if you waited until the week’s end in case the stock price didn’t rebound. This would obviously be a major loss in this first outcome but does lead us to the second one—loss.
Second Outcome: Lose 👎
As always when trading on the stock market, there is a chance that you made a bad call. In this scenario, the dates and the values are the same with one important difference—company X shares stayed below $70 in the week your one-touch option was up.
This would mean that unless you pulled out early at a smaller loss, you would’ve lost the $40 you invested into the option at the beginning of the month.
The last thing to note with this outcome is that some platforms offer a kind of a consolation prize. Sometimes they give a small percentage of the entire option to all the investors who lost on a particular option. This practice isn’t universal though, and is usually a very small amount of money—maybe you could get something like $5 if you invested $40 and lost.
Binary Options One-Touch Strategies 💡
Doing anything at all consequential in life without a game plan tends to be a bad idea.
This holds true when trading stocks, funds, commodities, and perhaps especially binary options. We say ‘especially’ since—apart from being fraught with fraud as a recent slew of lawsuits in Israel suggests—countries like the U.K. have them registered under the gambling rather than the investment commission due to some pretty valid points about their place on the stock market.
On the other hand, the Isle of Man, a Crown dependency of the U.K., has binary options registered as a game of skill rather than a game of chance—hinting at the very true fact that while there is some luck involved with these options, they are far from equal to just putting coins into a slot machine until you run out of cash.
Fighting Binary With Binary ⚔️
One of the main smart things you can do when trading binary options is hedging. While it is true that these options are themselves sometimes used to hedge against the risks of holding a long position, when hedging against losses on a binary option, it is usually recommended to do this using another binary option.
For example, you might opt for one one-touch option and combine it with a high/low option. Unlike with one-touch options, high/lows only expect you to predict the movement of the price without designating a target value—this makes them somewhat less risky but in turn, they also offer lower rewards.
Same Trajectory-Different Goal 🥅
So, you put in $40 saying that stock X will reach $70 within 7 days expecting $100, and you also put $40 simply saying that the price of that stock will rise—this option has a yield of only $70 though. if you were right on both accounts, you’d walk out of your $80 investment with $170 in the pocket.
If you got only the high/low option right you’d have made $70 on an $80 investment. While this would be a loss of $10, it is far, far better than a $60 loss you’d have suffered had you only placed a one-touch option. The risk with this approach is that if the price falls instead of rising you lose the entire $80 without gaining anything
Playing Both Teams ⚽
You might also go another way around. You might get a one-touch option saying that the value will rise to $70, and a high/low option saying that the price will drop. This way you only lose completely if the asking price does rise but to less than the needed $70.
Another drawback of this strategy is that you can’t get the full returns no matter what as if the one-touch option investment was a winner, you’d have to detract the $40 you put on the high/low one from the winnings.
These cover only the basic principle of hedging binary options with binary options and there are other combinations you could employ—and more exotic options you could use—but the basic principle remains the same. Essentially, you are trying to mitigate the risks as much as possible by creating more outcomes in which you are at least a partial winner.
That being said, you should be mindful that there is no way to completely get rid of the risks so you should never venture more than you can lose, like a Canadian who lost $65.000 over six months—neither are all days good for investing nor are all brokers created equal—for example, while there are several good binary options brokers in the US there is but one fully regulated by the CFTC.
Predicting Market Movements 🎿
Possibly one of the most basic ways you could try and gauge which direction the market winds are blowing is by looking at the bigshots of investing. For example, if the famed Michael Burry of the “Big Short” seems to be betting against Cathie Wood’s ARKK in an attempt to short it is worth looking at the situation. This could be an indicator that its price will drop and thus an opportunity for a high/low or one-touch binary option predicting this fall.
He, however, just like every other investor has made some blunders over the years and can’t be expected to be always right—meaning that even if you are going to use Burry’s actions as an indicator, you shouldn’t rely solely on them.
One technique you should definitely use before making big investment decisions is technical analysis and its two important components—moving average convergence/divergence (MACD), and relative strength index (RSI).
In a nutshell, RSI puts stocks on a 0-100 scale with regards to how much it is being bought and sold. A score above 70 can indicate that the stock is being overbought and is due for a price drop, while it being below 30 indicates that a rise in the asking price is on the horizon.
On the other hand, the MACD tries to figure out the average price of a stock for two different periods—one shorter and the other longer. If the average price for the shorter, more recent period is higher than the one measuring a longer timeframe shows higher numbers, it can indicate that its value is going to rise. If it is the other way around, it indicates a coming drop.
While neither of these methods can be considered crystal ball-level, checking them out beforehand is certainly much better than going in blind, and if both RSI and MACD appear to foreshadow the same market movement they can often be correct.
Furthermore, as they are very popular, they can sometimes become a bit of a self-fulfilling prophecy due to the sheer number of people acting per MACD and RSI’s indications.
Using a Double No-Touch Option 👌
Even if you believe that the prices of certain security are stable, you could still make some money quickly off of it using a so-called double no-touch option. When employing this option, you—or usually in reality, your broker—pick a security, a timeframe, and the price range it shouldn’t leave during the said time frame.
If the prices remain stable, you get whatever the amount of money offered for the option is. If it leaves these boundaries—usually called barriers—you lose your investment. The payout tends to be better, the longer the prices have to remain within the price range.
So, for example, you might see a double no-touch option offering to pay you $100 on a $40 investment if the USD stays between 6.45 and 6.51 Chinese yuan for two weeks. You look at the proposition, see that the current rate is 6.48 Yuan for a Dollar, and decide that is going to remain stable.
If the exchange rate stays within these boundaries for those two weeks you got yourself 100 bucks, if it leaves them and gets to, perhaps 6.55, you lose the 40 you invested.
Using a Double One-Touch Option 🤏
A double one-touch option, on the other hand, is more or less the perfect opposite of the double no-touch option—you get the money if the price breaches the barrier on either side and lose the investment if it stays within bounds.
So, for this example, we will go a bit into the past and take a look at the Chinese tech giant Tencent—the date is 02.11.2021 and the stock price is $97.14. At that point, Tencent has been growing for years and the Chinese tech crackdown—which has been quite the David to this Goliath—hasn’t happened yet. Still, it was obvious that the company was rather likely to either skyrocket or plummet—but it was impossible to be sure which of these would happen.
Under these circumstances, you could buy a double one-touch option stating that you win if the company either goes above $107 or falls under $87 within 15 days, and—wouldn’t you know it—just over two weeks later, Tencent’s stock was valued at around $85 allowing you to take offered payment.
In case of such volatility, the worth of a double one-touch option over the regular one-touch option is quite obvious. If you took a regular option here betting that the company would keep skyrocketing you would have lost your investment.
However, a drawback also presents itself as if you had gotten a one-touch option hoping for a fall, you’d have likely made even more money—the risk was greater so the reward would probably reflect that. Of course, you could achieve a similar result through short selling.
Why Trade One-Touch Options ⚖️
One-touch binary options hold their main advantage in that they can offer incredible returns with 300-500% being far from unheard of. Another great thing about them is that you can exploit more or less all market movements whether trading stocks, funds, currencies.
It can also be used on upward trends like the dollar is experiencing, or downward ones like the yuan, or AUD. But one of the most alluring advantages of binaries for some is that they give you the ability to bet on the world markets without having direct access to them or having enough money to day trade regular options.
On the other hand, such high yields usually only come with increased risks, and, much like with regular gambling the house always wins. Brokers that offer these options often have far better insight into the market, or, sometimes even the ability to manipulate the trends ever so slightly in their favor.
Also, ultimately, you will depend on which options the brokers are willing to offer—the best ones often not being available: if you can see it is a safe bet, so can the broker.
Pros
- Potentially stellar return
- Good for hedging long positions
- Good for hedging other binary options
Cons
- Very high risk
- Odds skewed in favor of the broker
- High risk of fraud
What to Keep in Mind When Trading Binary One-Touch Options 🏛️
So, just to cement your knowledge of binary one-touch options, let’s take a look at one more example. Activision Blizzard is a company that has had a very good run so far, and despite losing billions on scandals, it boasts stock that many experts consider to be very undervalued.
So, their shares stand around $82 towards the end of August 2021. Looking at their past performance, it is quite visible that they have been hit hard by the scandal and lawsuits and have been generally dropping during 2021
However, also looking at their past performance, it is clear that ATVI is still worth more than they were right before they plummeted in 2018, and that it is a company with staying power—overall good performance over its lifetime, and the ability to continue thriving in spite of troubles as highlighted by the aforementioned crash.
At a glance, there are two ways you could go about betting on the stock. You could look at their previous crash and current downward trend and anticipate a precipice similar to the one from late 2018.
On the other hand, you could be on board with some experts who believe that Activision Blizzard’s shares are undervalued in which case you’d want to find an option that requires growth to give returns.
Betting on the stock’s downfall and rise are both valid options here—some stocks are like that and can go either way. Naturally, this is the type of stock binary traders should avoid.
Binary options by their nature are risky and have high payouts—why would you add another layer of risk to your trade by betting on a stock that shows great potential to go in either direction? As a rule of thumb, it is much more profitable in the long term to stick to assets that are consistent and well-behaved.
Conclusion 🏁
As we’ve abundantly seen throughout this article, one-touch binary options are rife with both danger and opportunity. They boast some of the best returns on the market—with returns of 300% or more usually being found only in the world of crypto with surges like the one Dogecoin experienced in early 2021— but the gambling aspect is hard to ignore.
While you should always be vigilant when trading stocks, this tenent holds even truer when dealing with binaries like the one-touch options. Come prepared, don’t overdo it, remember that the odds are against you and you just might end up on top, or—as they call it in the world of binary options—in the money.
Binary Options One-Touch: FAQs
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What is the Difference Between Binary Option and Digital Option?
Generally speaking, the only real difference between a binary and digital option is the name. This is particularly true in the case of one-touch options as they both let you collect fixed winning if correctly predict a stock price move—upward or downward—and with both, you lose your entire investment if you are wrong by the expiry time.
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What Can I Trade Using One-Touch Options?
Generally speaking, you can trade everything that can otherwise be traded on the stock market using one-touch options—provided your broker offers the trade you desire when you desire it. Be mindful though that binary trading is completely banned in some countries.
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Are One-Touch Options Safe?
One-touch options are very high risk, very high reward trades. Apart from their all-or-nothing mentality, fraud is commonplace more so than usual among these investments—or gambles, depending on which government you ask.
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All reviews, research, news and assessments of any kind on The Tokenist are compiled using a strict editorial review process by our editorial team. Neither our writers nor our editors receive direct compensation of any kind to publish information on tokenist.com. Our company, Tokenist Media LLC, is community supported and may receive a small commission when you purchase products or services through links on our website. Click here for a full list of our partners and an in-depth explanation on how we get paid.
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