The organized stock exchange market is characterized by a wide spectrum of various financial instruments. One of them is binary options trading. It is highly likely that you have come across brokers that offer trading in Ethereum binary options contracts if you are a participant in trading in the broadly understood cryptocurrency market. Thanks to the large number of popular tokens that have reached record prices and volumes, binary options based on cryptocurrencies are constantly gaining popularity in the financial industry. Binary options contracts can be traded in several different ways and are generally available on cryptocurrency platforms. In this article, the Tytanid team will analyze Ethereum binary options.
What are Ethereum binary options?
With Ethereum binary options, you can guess whether the price of Ethereum will go up or down at some point in time. The mechanism of how this financial instrument works is that you will get paid for the option if you correctly predicted the price of Ethereum. On the other hand, if you make a mistake, the money you invested is lost.
The distinguishing feature of this investment instrument is that each Ethereum binary option has a predetermined expiration date. Following this date after which the option is evaluated to determine by the broker whether the market was in your favor and you reached the status "In the money", indicating that you were right. The second possible outcome is that you made a mistake and got an "Out of the money" result.
In addition, each Ethereum-based binary option has a defined total amount of potential profit that you can achieve by participating in the market. With this type of trading, only one outcome is possible, namely win or lose. For this reason, these instruments are called "binary options".
Ethereum binary options contracts
It should be pointed out at the outset that there is no one universal type of Ethereum binary options contract. A certain spectrum of investment opportunities in this area can be observed on the cryptocurrency market. The most popular types of binary options include:
Up or down
This is by far the simplest type of Ethereum binary options contract that allows traders to guess how much the value of the ETH coin will go up or down at the time of market maturity. This moment was determined at the moment of creating a given binary option.
In or out
When creating this type of binary options contract, it is required to set a price range which must contain an upper and lower strike price. The mechanism by which such a contract works is that traders predict whether the Ethereum price will close within or outside of this range.
Touch, no touch or double touch.
In this case, the task of investors is to predict whether the value of the underlying asset in the form of Ethereum will touch a certain price or not. These options close faster than other contracts and follow as soon as the price is touched, making them a great money making medium for traders who prefer cryptocurrency trading.
The scalable level of profit potential is one of the things that makes Ethereum's ladder binary options unique for traders who prefer to invest in cryptocurrencies. In this case, the task of investors is to specify multiple levels in a ladder contract for the future price movement of a specific cryptocurrency asset (in this case Ethereum) after the expiration period. A higher strike price yields higher returns, while smaller "rungs" in the ladder structure yield lower returns.
Due to its simplicity, limited financial risk, 24/7 trading opportunities and high volatility, Ethereum binary options contracts are an extremely popular derivative among traders around the world. Trading binary options based on cryptocurrencies such as Ethereum can be extremely profitable as long as you are good at guessing the market and making smart decisions.