Double No-Touch Option

Filed Under » , ,
Dictionary Says

Definition of 'Double No-Touch Option'

A type of exotic option that gives an investor an agreed upon payout if the price of the underlying asset does not reach or surpass one of two predetermined barrier levels. An investor using this type of option pays a premium to his or her broker and in turn receives the right to choose the position of the barriers, the time to expiration, and the payout to be received if the price fails to breach either barrier. With this type of option, the maximum possible loss is just the cost of setting up the option.

A double no-touch option is the opposite of a double one-touch option.
Investopedia Says

Investopedia explains 'Double No-Touch Option'

This type of option is useful for a trader who believes that the price of an underlying asset will remain range-bound over a certain period of time. Double no-touch options are growing in popularity among traders in the forex markets.

For example, assume that the current USD/EUR rate is 1.20 and the trader believes that this rate will not change dramatically over the next 14 days. The trader could use a double no-touch option with barriers at 1.19 and 1.21 to capitalize on this outlook. In this case, the trader stands to make a profit if the rate fails to move beyond either of the two barriers.

Articles Of Interest

  1.

    Options Basics Tutorial

    Discover the world of options, from primary concepts to how options work and why you might use them.

  2. How To Trade Forex On News Releases

    When economic data comes out, it can have a marked impact on the currency market. Find out how to profit.

  3. What do all of the letters in a stock option ticker symbol mean?

    The option ticker explains four main things about the option: the underlying stock, whether it is a call or a put option, the expiration month and the strike price. An option ticker is quoted ...

  4. What's the difference between a regular option and an exotic option?

    Before learning about exotic options, you should have a fairly good understanding of regular options. Both types of options share the idea of having the right to buy or sell an asset in the future, ...

  5. Basic Investment Objectives

    You might know about different asset types, but do you know how each type contributes to a particular goal?

  6. Exploring The Current Account In The Balance Of Payments

    Learn how a country's current account balance reflects the country's economic health.

  7. Break Into Forex In 12 Steps

    Learn how to get started in forex trading.

  8. Understanding And Playing The Dow Jones Industrial Average

    Learn strategies for investing in this price-weighted index and how to interpret its movements.

  9. Writing A Covered Call

    Writing an option is the process of selling to another investor the right, but not the obligation, to buy or sell a stock at a given price in the near future. It can also be referred to as shorting ...

  10. Arbitrage Squeezes Profit From Market Inefficiency

    This influential strategy capitalizes on the relationship between price and liquidity.
comments powered by Disqus
Marketplace
Hot Definitions

  1. Zomma

    An options greek used to measure the change in gamma in relation to changes in the volatility of the underlying asset.

  2. Yield Elbow

    The point on the yield curve indicating the year in which the economy's highest interest rates occur. The yield elbow is the peak of the yield curve, signifying where the highest interest rates occurred.

  3. Xenocurrency

    A currency that trades in markets outside of its domestic borders.

  4. Wanton Disregard

    A standard of severe negligence. Wanton disregard is a very serious accusation that indicates that a person behaved extremely recklessly.

  5. Ultra ETF

    A class of exchange-traded funds (ETF) that employs leverage in an effort to achieve double the return of a set benchmark.

  6. Toehold Purchase

    A purchase of less than 5% of a target company's outstanding stockmade by an acquiring company. A toehold purchase of just under 5%, while not a significant stake in a firm, allows the shareholders a "toe-holds" grip on the company and its decision making.
Trading Center
http://sp.fastclick.net/ad/tr/10858-64082-15546-0?mpt=817d675ae69c824070da8eb1755882b3