There are several options to choose from while trading with binary options. The most common among them is a simple way to determine whether the concerned asset’s price will go up or down. This is called an up-down or call-put option. Most new traders start with this type of instrument, and gradually move into more complicated bets down the road. Range binary option is one such option.
Range Binary is sometimes called a boundary option or tunnel bet, range options requires you to forecast whether the price of the asset will end within a predetermined range.
Trading with Range Binary is not recommended unless you have the basic understanding of the factors that influence an asset’s value. This is the case with all binary option types.
Let’s us illustrate this with an example.
You want to invest in Crude Oil, which is trading at $100. Further suppose that quarterly earnings are about to be announced, and you have a feeling they’ll be in line with analysts’ forecasts. Hence, you are of the opinion that the stock’s price may bounce up and down slightly, but remain relatively unchanged.
Also suppose that the binary broker is offering a boundary option with the price range between $115 and $120.
Given your belief that Crude Oil price will produce very little upward movement – that is, the price will move sideways – this might be a good trade to execute outside the range.