Binary options with unusual terms and conditions are commonly known as exotic binary options. This is a wide and heterogeneous category, and how these options work can vary dramatically between different brokers even when the use the same name for an option. Always read the T&C to safeguard yourself against unpleasant surprises.

High risk – high pay

Many (but not all) exotic options are high risk – high pay options. Compared to your average binary options they are less likely to end in the money, but when they do end in the money they pay exceptionally well. Therefore, they are popular among traders who enjoy high-risk trading.

Even though these options are high pay, they are typically created in a way that gives the broker a higher than normal edge over the trader. The trader takes a much higher than normal risk, which is not fully reflected in the size of the pay.

For some exotic binary options the risk-reward balance is so skewed that it would be more correct to call them lottery tickets, and it is better to treat this specific subcategory of exotics as a fun and exciting lottery experience than believing that it is normal trading.

Examples of exotic binary options

One Touch binary options

This binary option will pay if the underlying reaches a certain price point at any time during the timeframe of the option. Exactly where the price is at the time of expiration is therefore not important.

No Touch binary options

This binary option will pay if the underlying never reaches a certain price point at any time during the timeframe of the option. Exactly where the price is at the time of expiration is therefore not important.

Inside binary options (also known as In binary options)

This binary option will pay if the price of the underlying asset is within a certain range when the option expires. It is therefore a type of Range binary option, a category also known as Boundary binary options.

Outside binary options (also known as Out binary options)

This binary option will pay if the price of the underlying asset is outside a certain range when the option expires. It is therefore a type of Range binary option, a category also known as Boundary binary options.

Exotic over/under binary options

If you are familiar with standard binary options, you probably know about the regular over/under binary options. Within the field of exotic binary options, you can find over/under options that have been tweaked in various ways that make them exotic.

One example is the exotic over binary options that only pays if the underlying asset price is at a point very far above the current price when the option expires. Similarly, you can buy exotic under binary options that will pay if the underlying price is really low compared to the current price when the option expires. Since these extremes are less likely to happen compared to the price simply being over (or under), these exotic binary options are usually created to pay more than standard over/under binary options.