There are several different binary options instruments to choose from, with Pair options being among the newest additions to trading platforms. This form of trading is similar to trading Forex in that each trade will involve a pair of assets, with the goal being to determine which of the two will outperform the other. The primary difference is that instead of currency pairs only, the trades are likely to involve assets from other classes, such as Apple versus Google.
Since no two assets are likely to have prices that are similar enough for a direct comparison, relative performance will be used to determine which asset outperformed the other for the duration of the contract. The same as all binary trades, Pairs contracts are bound to an expiry time, at the end of which the outcome (profit or loss) will be determined. Using the two assets mentioned above, had you predicted that Apple would outperform Google during the selected time-period and they did, the offered payout would be yours.
There are a number of advantages to trading Pairs. One would be the fact that it can at times be quite easy to determine which of two assets is going to perform better than the other. There will be times when price movement for one or the other is quite clear, and market sentiment is easy to analyze. Another would be that you simply have to select one or the other, and need not be concerned over short-term spikes and falls, as the bigger picture is what is most important with this type of binary options trade.
The primary disadvantage is the fact that the upcoming price performance of two options, rather than one, must be taken into consideration. It will be necessary to analyze the past and current price movement of both assets if you are to accurately predict which of the two will perform better. Fundamental analysis will also have to be completed for both, as market sentiment (or lack thereof) will always play a role in price movement. Analyzing two underlying assets will involve a slightly larger time commitment, so keep this in mind.
“Floating Pairs” may also be offered by your broker. When offered, this type of instrument works very differently from the standard trade. Rather than being bound to an expiry time, a floating contract can be closed at virtually any time after it has been opened. The payout received (if any) will be directly related to the asset prices at the time the position was closed, along with the return percentage being offered by the broker. This instrument is similar to Forex trading in many ways, but do not confuse the two since the payout structure does vary.
Pair options offer a nice alternative to standard and FX trading. This instrument can indeed provide excellent profit opportunities throughout the day, even when markets are volatile. New traders who struggle with forecasting price movement for single assets may do well to test out this instrument. Although additional analysis is required, all that this binary options trade asks of the trader is to decide which of two assets is going to be the better performer during a set period of time.
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