Introduction to Call/Put Trades
Call/Put Trades are also known as Up/Down Trades or High/Low Trades within the Binary Option field. Call/Put Trades are the main driving force behind the Binary Option trading platforms as well as the entire Binary Option industry.
Over 80% of all Binary Option Trades are in one way or another Call/Put Trades.
The average payout percentage of a Call/Put Trade is 78%, but some Binary Options Brokers (Reviews) may provide payouts as high as 93%. This means that if you place an investment of $100, you can expect a return of $193 to your account if you forecast the correct movement of an underlying asset’s direction.
How to purchase a Call/Put Trade
An Up/Down Trade is very basic to operate. You simply select the underlying asset that you want to trade. Underlying assets can be categorized as a stock, index, currency pair or commodity.
After you have selected the asset you want to trade, you have to select if that asset will either move up (Call) or down (Put) from the current strike price. The strike price is the price the asset is selected at which sets the line for the rest of the trade.
The third part of the trade, after you’ve selected the asset and its direction, is for you to select the time that option will expire.
- *The asset must fall either above or below, depending on what your prediction is, the strike price at the time of expiry.
The last thing to do before completing the trade is to decide how much money you want to invest into that particular trade.
Remember, you are not investing in the asset! You are only putting money on the direction that you feel the asset will move.
If your assessment is correct then your trade lands ‘In the Money’. If the asset falls in the opposite direction, it is considered a loss since your trade landed ‘Out of the Money.’
Definition of Call/Put options:
- Call Option: is taken when the assumption is that an underlying asset will rise above the strike price at the expiry time.
- Put option: is taken when the assumption is that an underlying asset will fall above the strike price at the expiry time.
To traditional financial speculators volatility means uncertainty; but to a Binary Option trader volatility means opportunity. Binary Options are based off market movements, and Call/Put Trades are the heart of Binary Options. Binary Options are considered neutral, so day traders are not concerned if an asset falls as long as the prediction was accurate and stated it was going to fall. Once again, you are not investing in the asset; you are only speculating on the movement and can make money whether assets move up or down.
Short Term Options
Binary Options are considered an Exotic type of Option and are usually taken with short expiry times (60 seconds, minutes, hours, and weeks). The reason that Binary Option Brokers (Comparison list) can offer such high payout rates on them is because Short Term Option trading is unpredictable and a large brokerage can afford high payouts.
With Binary Options you know exactly what the payout for each trade will be when the trade is taken. The result works both ways. Before the trade is purchased you know exactly what you’ll take home from a trade that lands ‘In the Money.’ Some brokers (Reviews) offer rates as high as to 93%.
With Binary Options you will never lose more money than you initially invested in the option at time of purchase. If you selected to take a Call on an option, and that asset completely crashes, your trade will be a loss. But you will lose only what you invested at the beginning of the trade. It’s impossible to lose more than your original investment amount with Binary Options.
With Traditional Options you actually purchase the asset and then ride the trend, which could plunge or even sink, stringing you and your money along with movement and value of the asset, pip for pip.
When trading Binary Options market trends are important only in the direction of the trending market. This makes binary option trading much easier and amplifies the chance of making successful trades.
Another advantage that Binary Option trading has over other forms of online trading is that Up/Down Trades allow you to invest as much as you like. All brokers have their own stipulations on how much money is required for each trade. Some brokers (Comparison) out there have a $10 minimum on Binary Option trades, while other brokers may not have a maximum trade value, and if so the maximum may range as high as $10,000 per each individual option.
Binary Options are so unique because people have the ability to trade from their homes, with minimal amounts of cash, on prestigious trading assets such as crude oil and gold.
In the past, trading these types of underlying assets was only permitted for those who held brokerage licensees. Now, when you register with a Binary Option Brokerage, you have full access to their trading platform and can trade just like a broker would trade.
Price and Payout Changes
Prices and payouts can and will change regularly, depending how on what the market conditions are. As a day trader you’ll need to pay attention to what you are doing while you are placing a Call/Put Trade. It’s not unheard of that after you select an asset, select the direction of the asset’s movement, add your investment amount and want to execute the trade, you find the parameters of the payout rates have changed.
Binary Options operate on live market data, meaning the strike price should be exactly where it was at the moment you pressed “Apply” to implement the trade. The payout rates are also dependent on the market, so don’t expect the same asset to have exactly the same rates. Everything is dependent on what is happening within the markets and what your broker is willing to pay.