Types of binary options brokers

There are several different types of binary options brokers. Here we’ll explore the various leading platforms and outline how their offerings differ and why those differences can matter to merchants around the world. We categorized the main types of pads into three classifications: simple European style, limited range, and touch/non-touch.

Simple European-style contracts
What many people don’t know about binary options brokers is that they are selling contracts that are effectively identical from a retail trader’s perspective to European-style options contracts. For those only used to American-style option offerings, European contracts differ in one important way: the only time the contract can be exercised is at expiration. Fanatics of American-style trading would be more used to being able to exercise their right to buy or sell the underlying security at any time. Before expiration. That being said, binaries trade differently than normal European contracts in three main ways: binaries have a much shorter duration, they pay a high default return, and the position owner never takes an ownership position in the stock or underlying assets.

Range limit or barrier
Another subset of the broader types of binary options brokers offer barrier-based or range-limited assets. While the aforementioned European-style assets are effectively one-sided (the stock price ends above or below a predetermined target, or strike price), a constrained asset will have two sides. A trader then has the opportunity to select whether he prefers to own the inside range (between prices A and B) or the outside range (outside the zone between A and B). Otherwise, the contracts trade the same: high yield, short duration (measured in minutes, hours, or days), and no real ownership position at expiration.

Touch / Do not touch
A third type of offer from some binary options brokers is the contact/no contact contract. This is a hybrid approach to trading binary options that can (depending on the brokers used) be a derivative of a limited range contract or a European one. The twist on this type of offer is that the investor does not have to wait for the expiry to know if the asset will land in the money or not. If a target price (strike price) is reached during For the duration of the contract (rather than at expiration), the asset is considered at-the-money regardless of any price activity that occurs after the strike price is reached. These assets have been found to be attractive to a number of investors more accustomed to the way American or American options trading works. The caveat is that the target prices tend to be a bit higher than what investors might get by looking at one of the above-mentioned types of offers.