Puts And Calls In Binary Options
Puts and Calls in Binary Options are modest investment concepts that will benefit with all trades if knowledge is understood and implemented. Call options simply mean that you think the asset will rise in its value by expiry. Put options is when you believe the asset will decrease in value by the expiry. So in binary terms a call is known as “above” or “high” and put is “below or “low”.
It is important to fully understand the two options in binary options. These two options can be seen by comprehending the two in traditional options. To buy an option at a later date is called a Classical Option. You can also sell the option at a later date and get the same result.
A good example of the above is if you purchased a call option you would want the asset to rise in value of course then you would purchase it at the lower price, or original price and the opposite for put options. Since you want the asset to fall in value with put options this allows you to sell at a higher price of the original value.
You don’t sell or buy an asset in binary options. You would rather buy the chance to profit from the asset if it increases or decreases with the two different options; puts and calls.
Three Types of Binary Options
Call and put are terms that are usually only used when the trade involves upward or downward activity of the asset. Range or touch are two other binary option trades that are commonly used. The asset needs to finish within the preset range with the range option. The theories of calls and puts are replaced by range or out of range options. Boundaries are in place for touch options that must touch during the option period. Just like the previous options, puts and calls are replace with touch and no touch.
The Importance of Study
When it comes to all binary options trading the key to being successful is to study. Study is most important due to understanding how the asset has performed over short and long term periods. This will result in bettering your chances to have a successful trade. Thorough studies have eliminated the gambling aspect as the newer binary options traders tend to see these trades as a gamble. Calls and puts are basically educated guesses rather than just being another roll of the dice per say.
The Importance of Hedging
Hedging is important in binary options trading as well. It is one of the major elements that are used by large investors. Classical binary options are exclusively used as hedges that have become popular for even the average investor to lower the risk and increase the winnings.
Hedging means that purchasing a second option that goes in the opposite direction of the first one is considered hedging. If you purchased a call option then you can hedge your risk with buying a put option later in the option period. You can also buy a put option with hedging a call later on in the original option.
Stocks, Currencies, Commodities and Indices are the four asset classes in binary option trading. Puts and calls work in the same manner basically in each of the asset classes. Whichever asset is traded remember the call will always be the outcome if the trader believes that the asset will rise in its value or fall if it’s a put option.
In conclusion, the concepts stated above are unpretentious on the surface, but a high level of expertise still needs to be developed in order to take full advantage of the different choices made available in binary option trading.
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