What’s the difference between PUT & CALL Options in Binary Options trading?

BinaryOptionsNow | Published on August 15, 2011 at 2:29 pm

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For the past few years, the world of online trading has been growing exponentially, but out of all the different forms of online trading, there’s one type of financial trading that has surpassed all others due to its simplicity and profitability – it’s called Binary Options trading. If you have not already tried binary options trading, click here to get a free demo account with OptionBit.

The great thing about Binary Options trading is that anyone can learn how to do it in just a few days of trading. In this article we will explain the basics of binary options trading by answering the question: What is the difference between PUT Options and CALL Options in Binary Options trading?

What is the difference between a PUT option and a CALL option?

1. PUT Options

A Binary Option is commonly called a “PUT” Option if the option becomes profitable when it loses value (relative to the level at the moment of its purchase).

For example, consider a Forex Binary Option placed on the Dollar: If you forecast that the dollar will lose value after a release of economic performance, then go ahead by investing in a PUT Option.

It can also be called “European PUT” if the subscriber can only exercise his right after the date of maturity and “American PUT” ​​if he can exercise his right at any time before the maturity date (including exactly at the maturity date).

Thus, a PUT Option is useful when you anticipate the decline of an asset.

If the option expires exactly at the same price than the one at the time of the investment, the original sum will be fully returned to the investor.

 

2. CALL Options

A Binary Option is commonly called a “CALL” Option when it becomes profitable when the asset increases in value relatively to the level at the moment of its purchase.

For example, consider a Binary Option place on the commodity of Gold: if you feel that gold will appreciate in value due to economic conditions, then go ahead and invest in a CALL Option.

CALL Options come in various types: a “European CALL” Option is when the trader can only cash in on the option after the agreed upon date of maturity; and an “American CALL” Option is when the trader can cash in on the option at any time before the maturity date (including at the maturity date). The “Bermudian CALL” Option is a mix between the European and the American Option and it may be redeemed at various pre-defined dates between the start and the maturity of the option.

Thus, a CALL Option is useful when you anticipate the rise of an asset.

If the option expires exactly at the same price than the one at the time of investment, the original sum will be fully returned to the investor.

Now that you know all the differences between a CALL Option and a PUT Option, Go ahead and sign up for a Free Demo Account and get $500 of demo money free by signing up now with OptionBit.

 

Click HERE to know when to Buy a PUT Option

Click HERE to know when to Buy a CALL Option

Click HERE to see when to Sell a PUT Option

Click HERE to see when to Sell a CALL Option

 

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