Understand ITM, ATM, and OTM in Binary Options.
This is the short definition of these phrases and what they mean. To trade binary option contracts successfully, you need to understand each of these descriptions, what they mean in practice, and the various potential outcomes when you place an order. This article will help you to understand the significance of a contract being ITM, ATM and OTM, so you can make more informed trading decisions.
What is in-the-money?
What is at-the-money?
What is out-of-the-money?
ITM, ATM, and OTM binary option examples.
What is in-the-money (ITM)?
A binary option contract is in-the-money when the indicative market is above the strike by at least one tick or point.
If you are buying binary option contracts, those that are ITM have the highest chance of making you a profit. This is because there are three ways to profit:
The indicative price keeps moving up.
The market stays flat.
The indicative price moves down but stays above the strike.
The main limitation when buying ITM binary option contracts is the higher bid/offer price. This is the case because the contract is already in-the-money and your chance of profiting is higher.
You will have a lower profit potential due to this higher bid/offer price. The profit for binary option contracts is always calculated out of $100, so if you have paid more for the contract, your profit potential will be lower. For example, if you pay $70 for an ITM contract, your profit potential is $30 ($100 — $70). If you only pay $30 for the contract, your profit potential is $70. Profit potential is calculated excluding fees.
Below is an example of an ITM order ticket. As you can see, the strike price is 1734.5 and the underlying market is at 1743.907, the forex robot world cup which is higher than the strike price. The bid/offer prices are above the $50 mark, limiting your potential profit if you were to buy this contract. However, if you believe this market is going how to program your own forex robot revert back, forex earth robot settings passing the strike level of 1734.5, you may look to sell this contract, and your profit potential would be higher, reflecting the additional risk of this trade.
What is at-the-money?
The binary option contract that is closest to the strike price is said to be at-the-money. This is usually priced at around $50, as there is an equal probability of it becoming ITM or OTM. Typically, there is only one binary option contract considered ATM, whereas there could be several that are OTM and ITM. Be aware that a binary option contract cannot expire at-the-money, with regards to the payout criteria. As the question in the binary option strike is phrased as 'greater than', it needs to be one tick or point above the strike to be classed as ITM; if it’s not greater than, but exactly equal to the strike price, then it’s considered OTM from a payout perspective (with the exception of Optiondexx Events contracts where it is greater than or equal to the strike price to settle ITM). This is important to remember close to expiration — one tick can make all the difference to the settlement of the contract.
In this example, we have a binary option contract that would be considered ATM, best wsm forex robot robot list as the strike price of 1744.5 is closest to the indicative underlying price of 1743.860. Due to this close proximity, both buyers and sellers have very similar risk to reward ratios.
What is out-of-the-money?
A binary option contract is out-of-the-money when the current market is below the strike price. Those who are selling the contract (i.e. those who believe the current market will be below the strike price at expiration) are more likely to make a profit.
On the order ticket below, we can see the strike price of 1754.50 is higher than the underlying indicative market of 1743.07. In this case, a trader selling the contract could profit in three ways:
The underlying market moves lower.
The underlying market stays the same.
The underlying market moves higher but expires at or below the strike price of 1754.50.
As you can see, the bid/offer prices are below the $50 mark, limiting your potential profit if you were to sell this contract. However, if you believe this market is going to revert back and move in the opposite direction, passing the strike level of 1754.50, you may look to buy this contract. Your profit potential would be higher, reflecting the additional risk of this trade.
ITM, ATM, and OTM binary option examples.
Here is an example to illustrate the various possible outcomes for a binary option contract, depending on whether it is ITM, ATM, or OTM.
In this image, you can see that the indicative price for gold is 1743.367. The various strike prices are listed below. They fall into three categories:
ITM. These are contracts where the strike price is below the underlying indicative market (i.e. below 1743.367) – you can see them in the bottom section of the image. Take the strike of >1737.0 as an example. The answer to the question ‘will the strike be above 1737.0’ is already ‘yes’, which is why this contract is ITM. The contracts that are in-the-money give you the highest chance of profiting if you are a buyer. This also means they will be the most expensive to buy.
ATM. This is the strike closest to the indicative price of 1743.367, as shown in the center of the image above (1743.0). At this point, there is a fairly equal chance of the market moving above or below the strike, so the contract’s bid and offer prices will be the closest ones to $50. Note, there is only one strike considered to be ATM.
OTM. A contract is OTM when the underlying market is below the strike price. This applies to the top 5 best forex trading robot reviews four strikes in the image, as they are higher than 1743.367. These contracts are less likely to conclude ITM and to be profitable for buyers. As a result, they are generally priced lower for buyers; however, sellers who have the statistical advantage will pay more for these contracts.
Key takeaways.
There are myriad strategies for trading binary option contracts. In some instances, you may want to buy ITM binary option contracts where you will pay a premium for a higher probability of profiting. In other cases, you may want to buy OTM binary option contracts, where you secure the trade with a smaller amount of money but have a lower probability of a successful trade. You might adopt this strategy if you predict a big market move.
There is no right or wrong way to trade binary option contracts, whether they are ITM, ATM, or OTM. The strategies you employ will depend entirely on your own trading plan and what you are aiming to achieve.

60 Seconds Strategy Binary Options.
The minute binary options have their own undeniable advantages: they offer an opportunity to trade at any time (session), carry out a large number of transactions in a short time (accordingly increasing the chance of winning), and an incredibly large choice of broker-platforms, which provide a range of profitable conditions (bonuses, an extended variety of assets, absence of commission).
Many strategies are used in the 60-second binary options trade. The most well-known methods are suitable for these trades, but the strategy is still different: it requires very fast decision-making behavior and instant reacting to the situation of the market.
60-second strategy binary options with usage of indicators.
One of the most usable indicators in strategies for 60-second binary options is the RSI (Relative Strength Index). This instrument of technical analysis has an advancing nature and shows a possible change of trend. The indicator has 2 accurately differentiated fields (overbought and oversold). If the curve of graphs confidently leaves the zone of oversold in the bottom-up direction that means it is possible to trade for the purchase «Rise» (Call). In an alternative situation (when the curve leaves the zone of overbought), options trade on falling (Put).
Another interesting indicator for strategies of 60 seconds is Ichimoku. This is compared with clouds that show key areas (of resistance and support). If the curve comes out twice from the cloud in the up-bottom direction, that means buying an option Put is a good idea. The price will probably continue to fall and wolfe wave forex robot a trader obtains a profit. When the curve leaves the cloud in the bottom-up direction, that means you need to put all your attention on options Call (up).
Working with the Bollinger Bands indicator (in other words – bands or waves of Bollinger, BB), the constant increasing of rates after winning is not used (compare to Martingale). Profit is guaranteed by a large number of winning bids. The Bollinger Band indicator allows the trader to mark the break at the price movement. The «Breakdown trade» is used more often. When the graphics break through channel lines, in most of cases the price rolls back to the middle (to the next candlestick).
Deals are opened only in the moment of Bollinger Bands convergence (sideways). The number of profitable deals can be up to 70%.
One more Moving Average Indicator for 60-second binary options appears as the red line.
The Moving Average Indicator for binary options can be used for options with an expiration period up to 5 minutes, but this indicator also successfully works with 60-second turbo-options.
60-second strategy for binary options without indicators.
Although many traders prefer the hints of indicators, best ea forex robot there are strategies where they are not needed. It is enough for a player to draw a so-called trend line and as soon as the line rebounds three times, the trade is started. The picture shows when a deal is made with a PUT purchase.
It is a very interesting example with the addition of a lower trend line for the same graphics. This is called a wedge pattern (graphic). Such a situation happens infrequently in the market; that’s why it is necessary to use the wedge pattern. Wait for a final formation of the wedge (about 3 waves), and when the curve breaks through the upper or lower trend line, open the deal.
Another strategy for 60-second binary options.
Many trading strategies are suitable for very short-dated options that expire in just 1 minute. But there are several methods that are rather bad. For example, a hedging method (insurance). Its essence is to buy «safety» option in another market to minimize losses. This is suitable for Forex but not for binary options. Here, the price can vary in the course of a minute, resulting in losses for both deals.
Strategies of Support and Resistance Levels.
These levels give the most accurate signals of the price movement. These are lines within which the price moves. The levels are displayed on the tops of the candlesticks. An option is bought at the rebound from the level and only on the third candlestick (the first candlestick is a signal, the second is a conformation, and the third is a command to buy a 60-second option).
A few disadvantages.
60-second binary options are the riskiest. Even leaning on a competent strategy and armed with indicators, it is still very difficult to guess exactly the market movement, because too many factors influence it. There is an extremely high chance of being in the red.