What Are Range Options?
An increasingly popular trading type for investors at all levels, range options differ very slightly from standard touch options. As the name quite rightly suggests, range options require the trader to predict whether or not the value of the underlying asset will fall inside or outside a specified range, at the time the contract expires.
Just as with standard binary options, the result is something of an ‘all or nothing’ outcome as the trader can finish either in-the-money or out-of-the-money. Range trading is seen as a great way of adding further flexibility to binary trading ventures, opening the door to potential profit enhancement in all market conditions.
To put it into a working example, a trader may choose to buy a range option of USD/EUR which at the time trades for $1.10. The predetermined option range has been pinned at $1.00 to $1.27, with this particular trader believing that by the predetermined expiry time, it will be trading at $1.20. As such, they will choose the ‘In-Range’ option.
If the option was to then expire at $1.24, this would mean it didn’t breach the specified range and therefore the trader’s choice was successful. Exactly how much the trader receives will depend on the amount invested and the payout rate, which is usually 75% to 85% ROI.
Range options are particularly popular among traders prior to significant upcoming events, or when drastic market shifts/movements are expected.