If you want to be a successful broker of online binary options, there are lots of things that you have to master and learn. For starters you have to have a complete understanding of the terms that are used in this type of trading.
There are 2 words that you will hear often and those two words are call and put. Those are just basic words and there is nothing special in them. However, if we put them in a different context, for example binary options trading, then they are really important and in the next lines we will try to explain you why is this so? Basically in this type of trading you will not be able to execute a normal trading without the need of usage of at least one of those 2 words.
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What is a call option?
Explained in simple words, the call option is made when the price of the asset you have chosen is about to increase or your prediction is that it will increase within the expiration time. For example you are buying an asset (for instance – gold) at price 50$ and you think that the value of this asset will get higher by 5% within the next 1 hour. Basically you are placing a call optin here and if you are right, then you will generate a profit of 5$.
Explained in other words, if you are investor, you are applying your right to buy an asset – it doesn’t matter if it is a stock, indices, commodity or currency pair. As soon as you place a call option you are stating that your prediction for the price is to increase within the expiry time.
What is a put option?
Opposite to the call option, the put option means that you are predicting that the price of the asset is going to be lower than the initial price when you opened the position. This means that you are selling a particular asset and if your prediction is right you will generate profit thanks to the decreased price of that asset.
Thanks to the put option you can easily buy an asset for, let’s say, 8$ and then later resell it for 10$ or more. Often this option is used as a hedging technique. Basically the put option allows you to make a profit out of an unstable instrument.
Once again, we would like to repeat that the most important thing a person should do, when it comes to binary options, is to make sure that master the whole way of markets and how they work. This is why you have to be very careful in case you are trading for the first time. Remember, your primary target is to minimize your expenses, not maximize your profits.