The Range or Boundary binary options contract as it is sometimes referred to is becoming more widely available as demand for it grows among traders. This trade types is very similar to the barrier or tunnel contract that is available in options derivatives trading.
The structure of the contract is similar to the Touch binary options contract. When investing with binary options using the Range contract, rather than selecting just one price level on the chart, you will actually need to enter two. One is set above the current price of the asset that you are trading and the other below it. These two levels form a ‘barrier range’ or tunnel to the current market price.
Two choices are then open to you when trading with this contract on your account. You can either specify that the price of the asset will stay within these two levels or instead you can chose to profit if the asset price breaks out of the range set. Whichever scenario you set, you will earn your payout and finish ‘in the money’ if the conditions are met at the set expiry time.
The barrier trade is an interesting contract that expands the usage of binary options as a trading method. It is ideally used in one of two specific market scenarios.
For periods of low volatility and slow moving markets, setting a contract which anticipates little price movement can be used to profit from sedentary markets. In this scenario you could place the contract and specify for the price to remain inside your two barriers.
Alternatively if the market is volatile or news is due for release, then you can harness this volatility. Trading with Forex options would be an obvious choice. Here you would set the contract to payout if the price finishes outside of the levels you set on the contract. You would place upper and lower levels which you expect to see the price breakout through.
As with the One Touch binary contract, if you trade the breakout scenario (i.e. the price to move outside of the range specified) then you won’t have to wait until the expiry of the contract to be reached before you can claim your profit. This is paid out immediately that the condition of the contract is met – so when the level specified is reached.
An Example Of The Boundary Range Binary Options Contract:
The EUR/USD has been marking time between upper resistance at 1.2952 and strong lower support at 1.2825. There is no news for release. You could profit by placing your levels beyond each of these two market prices in the anticipation that the price will touch neither of these levels while the contract is live and running.