With the double one-touch binary option trade, the binary options trader selects a set of upper and lower price barriers above and below the current market price in which he thinks the price of the underlying asset will hit before the option expiration time. The broker will offer him a payout percentage corresponding to his selection.
For the investment to payoff, the price of the underlying asset only needs to hit either one of the price barriers once before the option expires.
Payout will vary greatly depending how far away the barrier prices are and the time till expiration. The further away the barrier prices, the higher the payout. The longer the expiration time, the lower the payout as one has more time to hit the barriers.
Unlike the common high-low variant where the payout rarely exceed 90%, the payouts for double one-touch binary options can easily exceed 100% and payouts between 200% to 500% are not uncommon.
It is entirely up to the trader how much he wishes to invest with each purchase of the binary option but the minimum and maximum he can put in with each option varies across brokerages.
EUR/USD is currently trading at $1.30. A binary options brokerage is offering 200% payout for a double one-touch binary option that expires in 5 minutes which has an upper price barrier of $1.31 and a lower price barrier of $1.29.
After tracking the price movement of EUR/USD for the past hour, the binary option trader believes that the underlying price movement is rather volatile and will hit either the $1.31 or $1.29 price levels within the next 5 minutes. He decides to invest $100 to purchase this double one-touch binary option.
If EUR/USD goes up to $1.31 or down to $1.29 anytime within the next five minutes, the investment pays off and the trader earns a profit of 200% of his initial investment, which is $200.
However, if the price of EUR/USD never rise to $1.31 or drop to $1.29 during the whole 5 minutes, the trader will have lost his initial investment of $100.
Conversely, there is the double no-touch variant as well. See Double No-Touch Binary Options.
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