A Touch Option is a binary options tool in which a trader needs to speculate whether a certain asset will touch (arrive) a predetermined rate during the option’s life duration.
Binary options trading usually revolves around the act of speculating on whether the expiry price of an underlying asset will be higher or lower than the strike price, by the end of a given time frame.
Trading a Touch Option not only revolves around trading within a specific time frame, but also involves speculating that a certain option will reach a predetermined market price during an pre-set duration.
If the market rate reaches or surpasses the predetermined price barrier at any point during the option’s life, it will expire In The Money.
A Touch Option has a predetermined payout rate in the event of a win, and the trader will lose the investment amount in case of an incorrect prediction.
An example of such a trade involves placing a trade on a certain asset and stating that it will reach 1.3528 during the option’s life. If it does, the trade is In The Money and the trader makes profit. If it does not, the trade is Out Of The Money.