Exotic Binary Options

Exotic binary options are a name that is used for different types of binary options that have very specific conditions to mature in the money. They usually give you a very high return if they do.

Short binary options

Short binary options are binary options with a short maturity. How short depends on the broker. Some brokers offer binary options with maturities that are as short as 15 seconds.

One touch/ no touch options

“One touch” and “no touch” are two types of exotic binary options. They are available at a number of different brokers.

Forex

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The forex market, also known as the foreign exchange market, is what we call the over-the-counter (OTC) global currency trading that determines the exchange rates for many different currencies around the world. It is not a centralized market. Instead, it is made up by a variety of players and their trading solutions, including central banks, commercial banks, investment banks, investment management firms, hedge funds, forex dealers, retail forex brokers and their clients, and large corporations in need of foreign currency for their business activities.

The forex market is the world´s largest financial market, and since it is comprised of a network of financial centres, it is active 24 hours a day, Monday – Friday.

Currency pairs

The foundation of the forex market are the currency pairs. When you purchase a currency on the fx market, you always pay using another currency, so each transaction involves two different currencies. These two currencies form a currency pair.

Examples of frequently traded currency pairs:

EUR/USD (Euro/US dollar)
USD/JPY (US dollar/Japanese yen)
GBP/USD (Sterling/US dollar)
AUD/USD (Australian dollar/US dollar)
USD/CAD (US dollar/Canadian dollar)
USD/CNY (US dollar/Chinese renminbi)
USD/CHF (US dollar/Swiss franc)
USD/HKD (US dollar/Hong Kong dollar)

The first currency in the pair is the base currency and the second currency is the quote currency.

In the currency pair EUR/USD, Euro is the base currency and US dollar is the quote currency. In the currency pair USD/JPY, US dollar is the base currency and Japanese yen is the quote currency.

The spot price

The spot price of a currency (as quoted in another currency) is the price of that currency when traded on the spot market. It is also known as the spot exchange rate. In essence, it is the price that a buyer and seller are willing to agree on for a currency transaction where delivery is to take place on the earliest possible value date. The cash delivery date for spot currency transactions is usually the standard settlement date of two business days after the transaction date (T +2), but there are exceptions.

Spot market transactions make up a large portion of the total forex market, and spot market prices have a huge impact on how the market values currency derivatives.

The forward forex market

The forward market is based on an agreement between a buyer and a seller to exchange currencies at a set exchange rate at an agreed-upon date set fairly far into the future (not T+ 2 business dates as for spot transactions).

Currency forwards are always cash settled (usually in USD); there is not actual exchange of the currencies in the currency pair.

The forward forex market is commonly used for hedging, which is a type of risk-management.

The futures forex market

This market is similar to the forward forex market, but matching and transactions take place through an exchange and the market is therefore strictly regulated and the futures contracts are standardized.

Just like forex forwards, forex futures are often utilized for hedging.

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Benefits
Drawbacks

The main benefits of binary options are:

A good return on investment if the option mature in the money

Makes it possible to make money quickly

Possible to trade with options based on your favorit assets

Provide a large leverage compared to trade with the underlying asset

Leveraged product with limited downside