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CALL and PUT binary options - their features and methods of use
The concept of CALL and PUT options initially differed from the modern interpretation. In the classic sense, a contract with defined terms of purchase/sale of the underlying asset. Pre-set the transaction price and the allowable time period.
The option holder has the right to use it or not, there are only two possible variants of development of events, therefore, are called CALL and PUT binary options (BO).
Each binary option in particular the price and the expiration is the underlying asset. It is an asset, the cost of which will be taken into account. Take, for example, oil as the underlying asset. Then, depending on its price, the trader decides whether to use the option or not.
Suppose now the price per barrel is $ 40, a month later, You predict a price increase to $ 50.
Available for trading assets
To make a profit based on their predictions, you buy a CALL option where the price is below $ 50, like $45. The expiry time is chosen a month or a little more. Then, if the price rises as expected, You use your binary CALL option, buying oil at $45.
As the market price of $50, You sell with a profit of $5 per barrel. If the price fell to $35, the option expires worthless and just not used.
From what kind bought the option, determines the type of transaction: buying or selling. The CALL option was referring to the purchase of the underlying asset, while PUT options grant the right to sell it.
The modern concept of options
Today CALL and PUT options call more than simple tools, but which operate on a similar principle:
CALL - a contract to improve the (higher);
PUT - in the fall (below).
Usually they call them options "Above" and "Below", and the principle of operation is quite simple. If the trader believes that the price of the underlying asset will increase over a particular period, then he buys a "Higher" if his forecast is a price reduction, options are purchased Below. The difference between CALL and PUT binary options trading only in the direction of.
CALL and PUT in trading platform
Options trading CALL and PUT
The principle of operation of CALL and PUT binary options trading is extremely simple, but to achieve positive results from trading quite difficult, because you must know well the market of the underlying asset. If the trader will not conduct the market analysis and be able to make accurate predictions, the sense in trading binary options will not.
An additional complication is choosing the of expiration. It is possible to properly determine the market direction, but wrong with the time of execution of the contract. For example, the market has risen, as You'd expect, but by the time of expiry again managed to fall.
The range of options expiry
Professional traders do not just predict the market movement, they are developing techniques of system. Trade is not chaotic, but on the basis of a clear, tested strategy.
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Trend strategy for PUT/CALL options
The strategy can be the signals of different indicators. One of them is the algorithm EMA - exponential weighted average. The use of weighted average in determining the direction and strength of current market trends. Trend strategy is based on three EMA with different periods.
Recall that the smaller the timeframe, the more quickly the indicator responds to changes in the market. On the one hand, this is a big plus for the indicator settings this way, but, on the other hand, the algorithm increases the number of false signals.
Put and Call options in trend strategy
On the chart with the underlying asset exhibit a period of 30 minutes, the expiry time of the option you select on the end of the day. A signal for position opening will be a moment when both curves EMA5 and EMA10 crosses EMA20 line. Example entry points are shown in the illustration.
Buying a Call option
You can see how first crossed the blue line (EMA20) line EMA5, EMA10 and then. At the moment of crossing the second line and receives a signal to buy the option. The option type ("Above" or "Below") is selected depending on which side of the heading line. When EMA5 and EMA10 are average with a period of 20 upwards, then sold the option "Above" as shown in the previous illustration. If on the contrary, you need to take contracts "Below."
The difference between call and put contratada
Enter the market only if since the beginning of the opening was not more than four hours, otherwise the purchase will be canceled. When working with currency pairs sign new deals must stop 4 hours before the end of the American trading session. This is done in order to provide the market sufficient time. Even if the market deviates from the desired course, he will have time to go back to the time of expiration.
This strategy is most effective when the market is experiencing a stable trend, which can be seen in the graphs with a timeframe of one day or week. Then the accuracy of such intraday strategies on average may be equal to 65-85%. You can change the period setting indicators and time frames to a schedule, but it is not recommended.
It is recommended to closely monitor news and publications economic indicators. Important news can be misleading, so you should refrain from trading before the news and open a trade after the market calms down.
|Category: Binary options | Added by: (07.11.2017)