No-touch options

Posted by Scriptaty | 12:39 AM

No-touch options are profitable if the price of a currency pair does not reach the target by a specified time. For example, a 10-day no-touch option of GBP/USD at 1.9200 when the pound is trading at 1.9100 may be priced at 40 percent of payout. This means you will pay $40 and receive $100 after 10 days if price does not decline to 1.9100.

A no-touch option offers better payout odds when the strike price is closer to the market price and the expiration date is farther away because the chances the currency will not touch the strike price diminish considerably the longer the trader has to wait.

One interesting property of the no touch is the fact the underlying currency pair does not have to move in the trader’s direction (that is, away from the strike price) in order to produce a profit. The currency pair simply has to stay relatively stationary in order for the trader to collect a payout.

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