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Call / Put Trading

binary options indices trading

There are usually two types of options that are traded in binary options and they are called Call and Put options. Each of them has a well defined function that can be easily comprehended and used.

 

 

 

The Call Option

A trader will buy Call options if his intention is to predict that the price of a certain asset will rise within the chosen expiry time. The Call option is considered profitable when it expires in the money.

If the trader, for instance, wants to trade a commodity such as oil and he estimates – after a thorough analysis of the asset and the financial news – that the value of the said asset will increase he will invest an amount of money in buying Call options. In other words, Call options are considered effective when a trader foresees an underlying asset gaining in value.

The Put Option

An investor will buy Put options if he estimates that price of an asset he takes interest in will decrease in the selected expiry time. It is, therefore, considered profitable when the asset loses in value as compared to its initial price.

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To continue our example with oil we will say that an investor speculates a fall of its price in the very near future. If the fundamental and technical analysis performed on the market helped the trader make the decision of buying Put options it is highly likely that the trade will be a successful and profitable one. If the options expire out of the money the trader will have lost his investment.

If, by any chance, at the end of the trading time the price of the asset neither rises nor drops, the trader is given his full investment back.

The Strategy

Although the procedure is simple, the prediction should be accompanied by a process of getting to know the market. Studying the assets and finding out what influences their price increase or decrease is a must, as well as developing a strategy of binary options trading. Every aspect of the trade is important and the investor should know how to use all the features to his advantage.

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There are not any things in the binary options world that are hard to understand but they all require time and dedication. The Call/ Put trading is no exception. So, if your intention is to become a successful trader you should first invest time in learning how and what could help you climb all the way to the top and only afterwards make money investments and build up your experience.

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