Table of contents:
How do Call and Put Options are working in Binary Trading? – On this site, I will explain it in detail on a trading platform how it works. Binary Options are a simple financial instrument. You will understand it very quickly.
There are only two ways to trade Binary Options:
- Call (Higher) – Invest that the price will rise
- Put (Lower) – Invest that the price will fall
Call and Put Options
Probably the easiest to understand the type of trading is that of call and put options, also known as “simple Binary Options”. This type of trading is basically the basis of trading and is offered by every broker. In the early days of binary options trading, this was the only type of trading available.
The classic trade with simple options – call or put?
If you are a newcomer to trading with the classic (simple) Binary Options, you first have the basic choice between so-called call and put options. This distinction between call and put exists in principle for all options, and not just for Binary Options. A call option implies that you profit from rising prices, so you are speculating that the value/price of the underlying asset will increase. It’s the other way round with put options.
Here you hope that the value/price of the underlying asset will fall after the option has been bought. So if you are optimistic about the performance of an underlying asset, you should opt for a call option. However, if you are rather pessimistic, choose the put option.
How do call and put options work?
The trading type “simple binary options” is also very suitable for beginners because you only have to decide on one direction and do not have to “foresee” a specific price or similar. As a trader, you only make the decision regarding the future direction of the price. This concerns the price or price development of an underlying asset to which the respective binary option refers. Underlyings are also referred to as commodities, goods, or assets, and in the case of binary options are divided into four groups:
- Currencies
- Indices
- Stocks
- Commodities.
It is very important to note that this type of trading is only about estimating a direction. On the other hand, the only decisive factor is whether or not the expected price development has occurred at the option’s maturity date. Whether the development occurs temporarily during the term of the option is not relevant. Incidentally, the potential gains with this type of trading are between 70 and 90 percent, depending on the broker.
Trading with call and put options – an example
The following example is intended to illustrate what trading in simple Binary Options looks like in practice. Let us assume that you think that at the end of the day, Deutsche Telekom’s shares have a higher price than they currently have. If this is the case, you have to choose a call option with the underlying Deutsche Telekom. You must also ensure that the term of the option extends to the end of the day.
If the price of Deutsche Telekom shares is actually higher at the end of the trading day than at the time you bought the option, you will have made a profit of between 70 and 90 percent. However, if the share price at the end of the day were lower than at the time you bought the option, you would have lost all or a large part of your capital.
If you say the price will do the opposite you can use the put (lower) option:
Conclusion: Easy to practise
Binary Options are a financial instrument which is easy to understand. There are only 2 ways to trade it. Use a call option for rising prices and a put option for falling prices. It is important to do a analysis first before you start trading. You need to have a forecast of the price movement. If you are right you can earn a high yield up to 100%.
Use a trusted Binary Options Broker for trading:
Broker: | Rating: | Advantages: | Start trading: |
 | + Yield up to 100% | ||
 | + Yield up to 95% | ||
 | + Yield up to 92% |
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