Binary Call Option

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Before you get started trading binary options, there are definitely a few things that you should know; by knowing these things you won’t just be able to make more educated trading decisions, but you’ll also be able to get more involved with the community as a whole.

A call option is one thing that you need to know about before you open your first trade. Throughout this article we’ll tell you what a call option is, the related terminology, and we’ll even provide you with a call option example trade to put everything into perspective.

What Is a Call Option?

mob sellA call option really is quite simple to understand; if you predict that the price of a stock, index, currency pair, or commodity will increase then you would place a “call option” trade. This is one of the most basic concepts that you should understand before you start trading binary options, there are many new traders who overlook this concept and it can definitely be damaging to their portfolio.

A call option is one of the most basic type of trade that you can execute, and for this reason it should be a staple in your trading.

Related Terminology

Once you get involved with the binary option trading community, or just about any trading community, you’ll find that a call option isn’t always referred to as a call option. Traders have a lot of terminology that they use for many reasons.

Placing a call option can sometimes be referred to as “going long”, or even simply as “buying”. In addition to this, it would be suitable to open a call option when the market is in an “uptrend”. Knowing this terminology will help you fit in with the rest of the trading community as a whole, which can actually be quite important.

A Call Option Example Trade

Even though you now know what a call option is and the terminology that is often used, you might still be confused about the concept. Take a look at the example below if you’re having trouble putting everything into perspective.

Let’s say that the stock of Company XYZ is currently trading at €20, and a trader thinks that it’s going to be trading higher at the end of the week. The trader could then open a weekly call option at the current contract price. If the trader was correct and the contract expired higher, the trader would receive a payout—it really is that simple.

Closing Notes

There are many considerations that you’ll need to think about before you get started with binary options, and this can easily leave many new traders overwhelmed. When you’re just getting started, it’s best to stick to the basics such as call options and put options.

Put options are very similar to call options, the difference is that a put option trade is opened when a trader believes that the market price will decrease.