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 bet your money on a Call option or on a Put option. Call/Put options are the simplest ones and they are currently one of the best ways to begin your binary option trading career.

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.

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 currently trades at 99.15. The trader predicts that the pair’s price will go up in the next hour, so he opens a trade at 12:00 by selecting the Call option and sets an expiration time of 1 hour.

If the USD/JPY currency pair is above 99.15 after 60 minutes, then the trade will expire in the money and the trader will receive his payout. Respectively, if the price is below 99.15, say 99.05, the trade will expire out of the money and the trader will lose his investment.

Put Option

Let us assume that after selecting and analyzing the asset, you decide that the its price will go down in the next hour. In this case, if you want to place a trade, you’ll use the Put option.

According to the example above, in case USD/JPY falls below 99.15, then the trade will expire in the money and the trader will collect the pre-determined payout. If the price, however, surges above 99.15, say to 99.35, then the trade expires out of the money and the trader will lose his/her investment.

Conclusion

Call/Put options are the simplest ones when it comes to binary options. This makes them the best entry level for traders who are new 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 riskier higher-yielding binary options, which we will discuss in the following articles.