Options University Blog

One-touch is a type of exotic option that provides an investor an option for payout as soon as the price of the security or the asset underlying option reaches a predefined level or surpasses the same. An investor can determine the position or the barrier on his won. He can also decide the entry time, the expiry period for the option and the payout on the option in case the barrier breaks.

This option leaves possibility for two different outcomes:

1. Trader reaches the barrier and manages to collect the payout decided upon during the initiation of the contract
2. Trader does not reach the barrier and thus loses out on the premium due towards the broker

This option carries great value for a trader who can take a position stating that the underlying asset’s price will surpass a certain predetermined level.  Such traders are usually unsure of the sustainability of the price increase. Hence, they choose this option since it proves to be inexpensive as compared to the double one-touch option.  These options are gaining popularity amidst the community of online traders, commodity and Forex markets.

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