Option Types! The Most Profitable!
Today, brokers offer multitude of options with different profits and structures of work. I don't mean timeframes or prices but the essence of the tool. Traditionally, traders work with binary options, but one's wrong if thinks any option is binary. Why am I telling this? Actually, most of you won't even need this, because the majority trade with binary options. Though, you should know about what other option types are. Firstly, it will help to distinguish tools and not to get surprised facing an unknown one on broker's site. Secondly, you need this to be a broad-mined trader and know all terms. Thirdly, some would like to try several option types to choose the most comfortable and suitable.
Which Option Is the Best?
Many traders can say "binary", but I'll argue as comparing options of completely different types is like comparing an automobile, an aircraft and a train.
Each type has its advantages for matching cases, but we can't say one of them is the best by all parameters. There are some traders, who trade with several types at the same time and gain.
- The most popular type is binary options, also known as fixed-profit options. Trading with them is very simple and comprehensive for everybody, so they've gotten such popularity. Actually, you have to forecast in which direction the price will go, and then buy a Call or Put option. Some already-defined time later, the order closes and if your forecast was right, you gain fixed profits, wrong - fixed losses. This scheme is like at a casino, but here, you place bets for assets, not for a roulette. And you can predict assets' charts, so, earn. Most are wrong thinking turbo-options are a distinct type, but in fact - they are binary. The only difference is their timeframes - turbo-options are never longer than a minute. As for the rest, they are alike other binary options.
- Another option type is "One Touch". Usually, profits for it are higher than for binary ones, and can reach 600-700%. Having bought a "One Touch" option, you place a bet that a price will touch some level at least for 1 time. For instance, a price of an asset is 1.5. Buying this option, you say that by 1 hour, the price will touch 1.7, which is the goal-price. Regardless of the closing price, you will get your profits, if it ever touches 1.7. The farther is the goal-price from the initial, the bigger is your profit in case of a right forecast. You'd better use this option during strong market fluctuations, appearing while major banks' chiefs or presidents are speaking about economical policies.
- "The Limit" option is almost like "One Touch". It supposes a price will not just touch a level, but close beyond it. In the previous example, you'll gain if an hour later the price will be more than 1.7. Usually, this option type has the biggest profit offered. As with the previous one, the farther is the limit from the initial level, the higher is your reward.
- Pairs are another option type. You trade with two quotations and place bets on one of them. You must answer: "Which quotation will give most profits, i.e. which will come up farther?". If both of them go down, that wins which lowered less. One may say that pairs are binary options, but you just trade not with currencies' ratio, but with that of stocks. The essence is the same, and profits are almost alike.
- Classic options, despite of the name, are used rarely and not by all brokers. The principle of trading is like one of standard option usage - for hedging (minimizing) risks. You buy an option, letting you buy currency, stocks or another asset for the arranged price, regardless of the price after the order's opened. Example: you buy a fixed-price option, giving you an opportunity to buy 100 € for 1.11 $ each in a week. The time comes, and the rate rises to 1.2 $, and you use in, having bought for lower price and now selling for higher. The difference is your profit, which mist cover the cost of an option.
Trading with a broker, trade system is automated. You buy an option, wait until time's up and gain proportionally to the distance the price covered toward you. If the price goes back from you, no profits there, but you are losing only the fixed-price of an option, because it gives you the right of buying/selling, but not an obligation. So, trading with classic options, you have fixed risks, but unlimited profits. If you want to trade with classic options, you'd better do that in strong market movements, because the more significant is the movement, the higher profit you can gain.
- There are other option types, but they're quite rarely used, so I won't describe them. More over, some brokers have their own company's options with unique features.
Which Option Is the Most Profitable?
Most profitable ones are "One Touch" and "The Limit" - some brokers give up to 700% profits in case of a right forecast. But you mustn't forget classic options have unlimited profits. However, the profit is proportional to forecast's difficulty - it's logic. To guess whether higher or lower the price will be is by far easier than to predict which limit will be overtaken or which point will be touched by the chart. Choose the tool you'll be able to trade profitably with, and don't look for enormous profits - you must work for them.
Different Trading Strategies!
I think we don't need to mention that different options require different strategies and you must consider that when choosing an algorithm or a tool. However, there are some universal strategies, suiting most option types. One of them is "News-Trading".
A quick tour to option types is done. Hope my article helped you to choose the best option for you, or several ones.