Posted in Finance, Accounting and Economics Terms, Total Reads: 341
Definition: Double One-Touch Option
The double one touch option gives the investor an agreed upon payout if the prices of underlying assets surpasses or reaches any of the two predefined barrier level. This sort of option is employed when one cannot accurately predict the direction of price's movement.
There are two trigger levels: - one above and another below the spot price of the underlying assets. If during the lifetime/ time to expiry, the prices moves outside either of the lower or the upper barrier i.e. the barrier is hit, the payout is activated and it renders the option "in the money".
Traders using this type of option have the right to determine the position of both the triggers/ barrier, time to expiration, and the payout to be received. The double one-touch option would not yield high results but if used consistently it may lead to good results.
The option type is binary either there will be a full payment if prices moves outside the defined range between the two barriers, or no payment if no barrier is breached prior to expiration of the option and the investor losses all his premium paid to the broker to set up the trade i.e. the investor ends up red.