Binary Options and Pair Options are a direct and simple way to trade and make profits foreseeing market fluctuations of currencies, stocks, commodities, indices and pairs of these assets. Pair Options are considered among the ‘easy-to-use’ options because they allow you to implement simple strategies to increase success rates.
They allow you to trade on a pair of titles, profiting with the prediction of what title will have a better performance. Pair Options are binary; you are paid only if you selected the title that has the best performance. The payout is the percentage of profit that you will gain if the option expires ‘in the money’ and it is presented at the beginning of a negotiation when the two titles chosen are brought into relation. Payouts depend on the pair, option type and market conditions.
So, the question is: what makes these options different from others where the broker offers still a couple of options (like Pair Options)? In this case to be compared are not two equal assets but completely different.
For example, you do not need to choose Yahoo and Google as a pair, but you can choose also Yahoo vs. Facebook. At this point, you will have to decide if at a given time, the title of Yahoo, compared to Facebook, will rise or fall. To calculate the payout, the relation will be: Yahoo as numerator and Facebook as denominator.
To help you choose the pair of assets is fundamental to be informed on the main economic data of the companies involved, not only the economic calendar but also the information about the launch of new products or the lifetime of the asset.
The advantage of Pair Option is that by trading pairs you can eliminate the entire effect of market conditions. It means that their trading is ‘market neutral’. You can profit even when the market fell, because only the relative performance among assets has an impact on the value of the pair.
Another advantage is the flexibility. With Pair Options, you do not have to wait until the end because you can close the position before the expiry.
The price of Pair Option is clear: there is no secret cost, the absolute loss is limited to the price of the option, payments are displayed permanently and are updated during the hours of operation of the market.
There are two types of Pair Options: fixed and floating.
Fixed Pair Options are options in which the title with the best performance is determined by the relative performance of the pair of titles by the time the option was purchased to his maturity. The payout does not depend from the fluctuations.
Floating Pair Options are options in which the title with the best performance is determined by the relative performance of the pair during a predefined period in which the trade took place (a day, a week or a month). Relative performance is measured from the beginning of this period and the payout time is always at the end of the day (week or month).
In both cases it is recommended to prefer options that still have a great correlation.