Put and Call Options

Before we start describing the performance of Call and Put options, let’s remember what an option is. An Option – is a contract in line with which it is possible to either purchase or sell a certain asset/assets with a specific fixed price called strike price and by the end of an expiration time – time by which a bet has to be done. Knowing this, the next step to follow is understanding of options basics and how they work.

Call/Put Options

Depending on a type of a trade, they are divided into Call and Put options. The first one means to Buy whereas the second one to Sell. In the former case, an option holder can buy it (not obligatory) at a strike price and expiration date; in the second case an option holder can sell it on the same terms.

To buy or to sell call and put options at which price and expiration times is already a matter of the cost of an asset according to which the price is either increasing or decreasing.

In other words, relying and basing on economical, financial, social and sometimes even cultural events, a trader/investor is trying to predict a value of a particular asset. Will the value go up or down? To make the right prediction on the direction of an asset’s value, it is always very important to make a careful and accurate research as in case of loss the invested money will be simply gone.

Styles

Expiration date of call and put options also varies in line with an American or European style. Options that belong to an American style can be exercised (bought or sold) only at the last day, whereas options that have European style can be exercised before the expiration date.

Characteristics:

  • strike price;
  • expiration date;
  • type of option;
  • type of assets;

Conclusion

Put and Call options are used when trading binary options on the financial market. Having analyzed all the parameters, one can conclude whether the asset’s value will increase or decrease during a certain period of time. The result can be seen in less than an hour. If you have analytical, mathematical and theoretical skills then you have all the chances to make profits after each prediction. Who wouldn’t want to have extra money plus gain invaluable experience?