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  Call/Put Options
  Call/Put options = High/Low or digital. The best known and most popular type of binary option explained in detail.

A small compilation of factors and tips critical for success that can have decisive effects on trading!
Trading in binary options is technically easy but demands high capacity for judgement and decision of the trader. Therefore in the following it will be explored which tips can truly be helpful with this kind of trading. These tips come from veteran traders who on the basis of deep market knowledge and long trading experience evaluate the new trading tool of binary options. Thus these tips also apply to trading at exchanges in general.

Pfeil grün Most popular option variant: Call/Put

The Call/Put option is probably the most popular variant among binary options because it is easy to understand and to trade. The trade is either successful, in which case high gains will result, or else the investor will lose almost all of his commitment. (See also Call/Puttrading). This enforces risk management that has to include the total option price, so that the total loss possibility must be taken into consideration when conceiving the investment. For experienced traders this may require an adjustment as they are used to limit their losses through stop-loss. This is not needed for Call/Put options which are designed to anticipate the occurrence of the predicted event – rising or falling rate, remaining within a range (range/boundary options), reaching a rate limit (touch or one-touch options) – and consequently the payout of the agreed upon profit amount.
If the event has not occurred at the option’s term expiration time, the investor’s prediction has failed. Since binary options represent merely predictions of rate development and not trade with real assets (shares, commodities, currencies), the loss of an option is tolerable because of its low price. The gains result from the option’s leverage effect.

Pfeil grün Gain and loss possibilities with Call/Put options

The investor decides on an asset and speculates for instance on a rising (or falling) rate of this value. This base value can be an index such as the Dax, any particular stock, a commodity or a currency pairing. Which assets are actually available depends on the respective broker. Commonly there are around 50 to 100 assets actually available (as shown in our brokerage comparison), including the most important indices, currency pairings, blue chips among the stocks (as for instance all the Dax values), and the most important commodities like gold, silver, crude, copper and aluminium.

Gains are realized if the Call/Put option ends up in the money at expiration time, meaning that the desired event, like a rising or falling rate, did occur. The profit payout now due was determined upfront, that too is a big difference from classic options where the return is determined by triggering stop-loss or sale by the trader at reaching a certain rate threshold. The returns that can be realized with Call/Put options are therefore fixed, provided that a prediction turns out to be correct. For newcomers to option trading this is a very comfortable variant of trading as it frees them from decisions involving stop-loss management. Experienced traders should give this method a try because the decisions about stop-loss – practical risk management – will in principle be correct as often as incorrect. Conducting money management with Call/Put option via capital investment could, compared to classic options, yield gains just as often or more.

Pfeil grün Trading in Call/Put options

Returns are awarded by particular brokers differently, between 75 to almost 90 percent of committed capital. In some situations brokers will in cases of loss pay refunds of about 5-15 percent of the option price, but then they will also award a little less in cases of a win (for instance about 75 to 80 percent); if no refund is paid at all for losses, the return will be higher in the case of a win. Some brokers do not grant refunds at all, for example EZBinary or OptionYard, instead they offer a stop-loss function.

Returns can also amount to more than 150 percent and in singular cases over 400 percent, depending on the particular broker. Brokers will pay over 400 percent for instance if during the weekend a trader orders an option, whose actual purchase will be triggered by the broker on Monday morning at stock opening, and whose sale will take place immediately afterwards. If the trader’s prediction was correct, which is very speculative because the rate development cannot be determined over the weekend, he earns a return clearly in the range of a three digit percentage. This speculation can easily be undertaken with low capital commitment, because with many brokers a trade can be ordered with a commitment of as low as €25, in some cases even just €5. Within traditional option trading too, traders speculate on the opening gap occurring Monday morning by buying an attractive option on Friday evening at closing time, hoping that its price will have multiplied by Monday morning.

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