Call and Put Options

Binary Options – Win or Lose?

As we have already mentioned at an earlier stage in our tutorial, the concept of binary option trading is quite simple, because the trader doesn’t have to make many choices. In fact, your job as a trader is to choose whether to play your money on a Call option or on a Put option.

Call Option

Let’s say that you’ve picked an asset that you want to trade and you’ve already read the data provided by the technical tools. You’ve analyzed all the information and recent financial news and you’ve reached to the conclusion that the asset’s price will go up in the next hour. In this case, you’ll have to place a trade on the asset and select the Call option. SelectingBinary Options – Win or Lose?

In fact, your job as a trader is to choose whether to play your money on a Call option or on a Put option.You’ll learn when to play with a Call option and when to play with a Put option just in a few minutes. Call/Put options are some of the simplest ones and they are currently one of the best ways to begin your binary option trading career due to their simplicity and easiness.

Choosing the Call option means that you are predicting that the asset’s price will go up before the expiration time comes. Here’s an example how trading with a Call option works. A trader selects the USD/JPY currency pair which is currently valued at 99.147. The trader predicts that the pair’s price will go up in the next hour, so they places a trade at 12:00 by selecting the Call option and sets an expiration time of 1 hour.

If the price of the USD/JPY currency pair is above 99.147 at 12:59, then the trade will expire in the money and the trader will receive his payout. Respectively, if the price is below 99,147, the trade will expire out of the money and will lose their investment.

Put Option

Remember the scenario we mentioned above? This time we will make the following change – let’s say that after selecting the asset and performing technical analysis, you’ve decided that the asset’s price will go down in the next hour. In this case, if you want to place a trade, you’ll use the Put option. Selecting the Put option means the trader is predicting that the asset’s price will go down before the expiration time.

A trader has selected the USD/CHF currency pair for their next binary option trade. Currently, the pair trades for 0.922. After performing technical analysis, the trader has reached to the conclusion that the price of the currency pair will go down in 2 hours. Due to this reason, the trader places a trade at 14:00 on USD/CHF pair using the Put option.

In this scenario, the trader predicts that the price of the asset at 15:59 will be below the strike price of 0.922. So, if at 15:59, the price of the USD/CHF pair is below 0.922, then the trade will expire in the money and the trader will collect the pre-determined payout. If the price is above 0.922, then the trade expires out of the money and the trader loses their investment.

Conclusion

Call/Put options are some of the simplest ones when it comes to binary options. They are also the best way to make your first steps in the world of binary options trading. We suggest you to stick to this type of binary options until you gain some experience and confidence in your skills. When you feel you are ready to make the next step, you can try trading other types of options by using real money. Don’t forget to always use a demo account when trying out new types of options!