High-Low Binary Options Explained

For the common high-low binary option, the trader buys a binary call option if he thinks the price of the underlying asset will go up above the current market price or if he thinks the underlying asset price will go down, then he will buy a binary put option. If his assessment is correct, he will receive a payout. Otherwise, he loses the initial investment.

As binary options have fixed returns, it doesn’t matter how high or how low the price of the underlying has moved past the strike price. The payout is also fixed and known prior to entering the trade. Also important to note is the fact that the payout for a successful binary trade is usually only about 70% to 80% of the investment put into the trade.

Binary options also typically have very short expiration times ranging from as fast as 60 seconds to just a few weeks.

Common High-Low Binary Call Option

Click on the diagram below to view a detailed example of how the basic high-low binary call option works

Graph showing the expected profit or loss for the binary call option strategy in relation to the market price of the underlying security on option expiration date.

Common High-Low Binary Put Option

Click on the diagram below to view a detailed example of how the basic high-low binary put option works

Graph showing the expected profit or loss for the binary put option strategy in relation to the market price of the underlying security on option expiration date.

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