What is a call and put option in binaries?

Binary call and put options are fundamental tools in the investment world. If you are new to this field, you may be wondering what exactly are they and how do they work? Below we will explain in detail everything you need to know about these options.

What is a call option?

A call option is a contract that gives the investor the right, but not the obligation, to purchase an underlying asset at a specified price on a specified date. This type of option is used when the price of the underlying asset is expected to increase in the future.

If the price rises above the strike price, the investor can exercise the option and make a profit. On the other hand, if the price of the underlying asset falls, the investor only loses the premium paid for the option.

Characteristics of a call option:

• The right to purchase an underlying asset at a specified price.
• No obligation to purchase the asset.
• It is used when the price of the underlying asset is expected to increase.
• Unlimited earning potential.
• Risk limited to the amount of premium paid.

What is a put option?

On the other hand, a put option is a contract that gives the investor the right, but not the obligation, to sell an underlying asset at a given price on a specific date. This type of option is used when the price of the underlying asset is expected to decrease in the future.

If the price falls below the strike price, the investor can exercise the option and make a profit. Otherwise, if the price of the underlying asset rises, the investor only loses the premium paid for the option.

Characteristics of a put option:

• The right to sell an underlying asset at a specified price.
• No obligation to sell the asset.
• It is used when the price of the underlying asset is expected to decrease.
• Unlimited earning potential.
• Risk limited to the amount of premium paid.

How do binary call and put options work?

Call and put options in binary work as follows: when an investor buys a call option, he is betting that the price of the underlying asset will rise above the strike price over a specified period of time.

On the other hand, by purchasing a put option, the investor is speculating that the price of the asset will fall below the strike price at the time of expiration. In the event that the investor's prediction is correct, he will earn a fixed, pre-determined profit. However, if the prediction turns out to be incorrect, the investor will lose the amount initially invested in the option.

Binary call and put options are tools that allow investors to speculate on the price movement of the underlying asset. It is important to understand how they work and when to use them to maximize profit potential and minimize risk. If you are interested in trading binary options, we recommend that you do further research and consult with an investment expert.