The price of a Touch Option is called the Premium and is expressed as a percentage (%) of the potential payout.
For instance, for a notional size of 1,000 and a price of 10%, the Premium will be 100 units of base currency and the Payout will be 1,000 units of base currency.
For long positions you pay the premium and for short positions you receive the premium.
|Example:||You are looking for a potential payout of EUR 1,000 if EURUSD reaches 1.1500 within two weeks.|
|The price of the One Touch Option is 20%.|
|You the pay EUR 200 (EUR 1,000 x 20%) for the option.|
|If the EURUSD spot price reaches 1.15000 before it expires you receive the pay-out of EUR 1,000 |
(net profit of EUR 800).
|If it doesn't reach the trigger level of 1.15000 your loss on the trade is the initial premium you paid for |
the option (EUR 200).