ConceptUp/Down binariesTouch binariesChained option contracts
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Dukascopy Bank focuses on the most popular and simplest type of binaries, which is commonly referred to as “Up/Down” or "Call/Put" binary contracts.
With Call/Put binary options, the trader determines whether the price of the underlying at the termination of the contract will be higher or lower than the price at the beginning of the contract. The only thing that determines the possible gains with Call/Put binaries is the price at the expiration time of the option contract. In case of a correct forecast, the option is In-the-money and the trader receives back the paid premium plus an amount equal to the applicable payout ratio (between 70% and 90%) multiplied by the premium amount. In case the forecast of the trader was erroneous, that is the market price at the time of the option's expiration is lower than the strike of the Up/Call option (or higher for the Down/Put), the contract is Out-of-the-money. In this case there is no gain for the trader and they lose the premium paid.
Usually, the gains paid for in-the-money trades depend upon the underlying traded and the yield (payout ratio) that the broker is willing to offer. The approach of Dukascopy Bank is to offer a uniform payout ratio for the entire range of tradable instruments (see conditions for more details).