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If the spot rate meets the strike price at any moment before the option expires, a one-touch option provides a premium to the option holder. Investors can specify the goal price, the period to expiration, and the premium they will earn if the target price is met using the one-touch option.
Unlike traditional calls and puts, one-touch options allow investors to profit on a simple yes-or-no Market forecast.
The traders set a barrier of upper and lower prices above and below the current market price that they believe the Underlying asset's price will hit before the option expiration time with the double one-touch binary option. The broker will provide a payment percentage based on their pick. The Underlying Asset's price just needs to reach one of the price barriers before the option expires for the investment to pay off.
The payout will be highly variable depending on how far away the prices of the barrier are and how much time remains before they expire. The larger the payment, the further distant the barrier prices are. The smaller the payment, the longer the expiration period, as there is more time to hit the boundaries.
If an investor maintains a one-touch option until expiration, only two outcomes are possible:
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Like ordinary Call and put options, most one-touch option trades can be closed for a profit or a loss before expiration, depending on how near the underlying market or asset is to the target price.
One-touch options are helpful for traders who anticipate the value of an underlying asset or market will meet or exceed a given price level in the future but are unsure whether that price level will be sustainable.
A digital option is also known as a binary option. A one-touch option is less costly than other exotic and binary options such as double one-touch or barrier options since it just has a yes-or-no conclusion at expiration.
Small investors do not commonly trade derivatives, such as one-touch options. Although they are offered on some Trading platforms, regulators have repeatedly warned investors that they'll be overvalued.
Here are the key benefits associated with one-touch options:
Advanced traders will be able to successfully use One Touch options throughout their trading day, while others may want to specialise. For example, volume and market Volatility are likely to alter dramatically after a specific data release or incident.
Similarly, a market may be Flat in the run-up to an announcement before becoming volatile. If a trader believes that trading volume will be unusually low or high, the Touch option allows them to take a position based on that perception.