One-Touch Option

They have this, legally, in Amsterdam. But that's a different story.

We’ve just hung up from a very interesting monthly phone call with our personal psychic, Madame Enigmatia. She told us that, by the time we have our next phone call 30 days from now, the price of our most beloved healing crystal company’s stock will increase by no less than 10%. The tea leaves didn’t tell her how long the price would stay that high, but its hazy aura suggests it won’t last forever.

So what are we supposed to do with this information? Well, one idea is to purchase a one-touch option contract. A “one-touch option” is a binary option that pays us a premium if a security hits a certain strike price before the option expires.

So...let’s say the current price of Mind Minerals stock is $15.00 per share, and according to Madame Enigmata, it should hit at least $16.50 within the next 30 days. So we buy a one-touch option which basically says just that: we expect the price to hit $16.50 within the next 30 days. We pay $30 for the option, which will pay a premium of $50. If Madame Enigmata’s prediction is correct, we’ll make a profit of $20 (the amount of the premium minus the price of the option). If she’s wrong, we’ll be out $30…and we’ll be in the market for a new psychic.