Range & Boundary Options
There are several plays you can make when trading binary options. The most common trade is a simple bet on whether the underlying asset’s price will move up or down. This is called an up-down or call-put option. Most novice traders get started with this type of instrument, and move into more complicated bets down the road. One example is a range binary option.
Range Binaries – Tunnel Bets – Boundary Options Trading
Sometimes called a boundary option or tunnel bet, range options are a forecast of whether the asset’s price will end within a predetermined range.
“In Range” Trade: The above example is from 24option showing an ‘in range’ trade. To win the price must finish in the light gray area.
“Out Of Range” Trade: And the converse or opposite option is the boundary bet to finish ‘out of the range. To win, your option has to finish outside of the range.
Screenshots from 24option, one of the few legit brokers to offer range trades.)
Range Binary Options: How Does Range Trading Work?
Range trading is becoming more popular with a lot of traders, particularly those in pursuit of high returns. The problem is, not every binary options broker offers this type of instrument. Among the legitimate binary brokers we recommend, only a few trading sites carry boundary options.
Below, we’ll explain how range trading works and how to profit from it. You’ll learn about the challenges that confront traders taking positions in this type of bet. If you’re just getting started with binary options trading, we recommend getting some experience under your belt trading up down options before venturing into these instruments.
Also on this page, we’ll point you to our top-rated binary brokers that offer range trading.
Basics of Boundary Trading
Boundary trades are simple to execute and easy to understand, even if the strategy behind placing winning trades is complex. So, let’s start with the basics.
We mentioned earlier that range trading involves predicting whether the price of the trade’s underlying asset will end up within a given range.
The range is established by the broker.
You are left to decide which asset to trade, the dollar amount of your trade, and whether you think the price will finish inside or outside of the broker’s range.
You’ll be able to see the high and low prices that define the boundary (or tunnel) on a price chart. The range will be displayed in a different color than the rest of the chart. Once the trade has been executed, you’ll see the asset’s price rise and fall according to the current market for that asset.
If you choose an inside boundary option, your trade will finish in the money if the asset’s price ends within the range determined by the broker. If the price ends outside the range, and you’ve predicted otherwise, you’ll lose the amount you staked for your position.
This type of binary option may expire in as little as 30 minutes or within 24 hours. Much depends on the broker offering the trade.
How To Profit From Range Binary Options
One surefire way to lose money when range trading (or tunnel betting) is to execute trades without doing any research or having any knowledge about the underlying asset’s market. Unless you have at least a basic understanding of the factors that influence an asset’s value, you’ll find it difficult to execute profitable trades on a consistent basis. This is the case with all binary option types.
Let’s take a look at a couple of examples that will demonstrate how to approach range trading.
Suppose you want to make a play on Google’s stock, which is trading at $600. 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 believe 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 $610 and $615.
Given your belief that Google’s stock 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.
Let’s use a EUR/USD currency pair for another example.
Suppose the pair is trading at 1.22 right before Federal Reserve Chairman Ben Bernanke is scheduled to announce whether a new round of quantitative easing (QE) is planned. Suppose further that the binary options broker you’re using is offering a EUR/USD range option with the range set at 1.225 to 1.228.
If you believe the Federal Reserve will embark on another round of QE, you might expect the Euro to rise against the U.S. dollar following the announcement.
In that case, if you feel confident the currency pair can reach a support level at 1.225, you would do well to execute the trade with a bet that the price will finish “in range.”
If, on the other hand, you have a feeling there will be no further round of QE, you might bet the price will finish “out of range.”
Note in both examples that your knowledge of the underlying asset’s market plays a key role in your ability to predict its price movement. For this reason, range trading can be very profitable for informed traders. The uninformed are left to make guesses, which is a good recipe for taking a loss.
Recommended Binary Option Brokers For Range Trading
Boundary options can only be found at a few of the reputable binary options brokers on our recommended list. But don’t limit yourself to only using those brokers. We strongly recommend creating an account at several sites so you can take advantage of the best trades for any given asset. Below, we’ll describe some of the features you can expect to see when you visit each of the top brokers.
MarketsWorld – Like IQ Expert Option, Markets World does not offer boundary binary options. But there are other features that make them an attractive choice. For example, they have one of the longest lists of assets among the top US facing binary brokers. Also, returns average an extremely high low 75% to 95%. You’ll also receive a no deposit bonus to try the platform.
ExpertOption – Currently, Expert Option does not offer range trading, though they may in the future. We continue to recommend them for a number of other reasons. You can start trading with a $10 minimum deposit. Additionally, trades start at a low $1, limiting the amount of capital you need to put at risk for any one trade. ExpertOption maintains an impressive list of assets, including several stocks and commodities that are difficult to find elsewhere. Payout percentages average between 75% and 91%, though some one-touch options can return as much as 500%. Visit ExpertOption today to get started. They do not accept traders from the US, Canada, Israel or the European Union.
24Option – This is our top choice for range trading. 24Option has consistently proven to be reliable and easy to use. Their payout percentages are very competitive. They average 85%, but scale up to 300% on some high-yield instruments. In addition to boundary options, you’ll find high/low, touch/no touch, and 60 second binary options. And you’ll have quick access to an impressive range of stocks, commodities, currency pairs, and indices. Visit 24Option to register your account today.
IQ Option – This broker is perhaps the most trusted binary options broker in the industry. They have been in operation for years, provide top-notch support, and offer payouts ranging between 72% and 90% (though some trades return far more). IQ Option offers trades on more commodities than most of their competitors, as well as range options, 60 second options, and platform-specific features, such as Option Builder. You can also take advantage of a live demo account. Visit IQ Option to create your account today.
Range trading looks easy, but requires a keen understanding of the markets for the underlying assets. Don’t underestimate the risk involved with this type of binary option. When you’re ready to start trading, we recommend that you create accounts at the five brokers listed above.