The traders who decided to experience the Binary Option world have the possibility to choose from a variety of options in order to make a huge profit. Some that offer a good way of earning some extra money are stock options. What are the stock options? Well, they are seen as a complex Call Option and . These options give the possibility to the traders to make profit even if the market is going in the right or wrong direction. These options allow the traders which had invested an amount of money to buy or to sell a security, even if they are indicies or commodities, as some moment.
Well, a Call Option can be seen as a warrant, an instrument, related to this financial field that gives the possibility to the trader, he is not obligated to do this, to buy a security at some point, in the future, before the expiry time of the trade. This option increases in its value if the price is going up and obviously it decreases in value when the security price is going down. It depends on the trader and on his capacity of anticipating in which way are going the prices. It is a very simple way to gain money, for those which are trying for the first time trading, not only for its simplicity but also for the success generated by this type of option.
Here is a simple example of how a Call Option works. If the price of a stock is $40 in this moment, you can buy its Call Option that gives you the possibility to purchase that stock for $40 as long as its expiry time is being available. If in the market, the price of that stock rises at $80, you will have the opportunity or the right to buy that stock with the initial $40 if your Call Option had not expired yet. The trader should be very carefully when it comes out to talk about the expiry time. The date when a Call Option expires is the last day in which this option exists. Some of them expire at the four month of the week, other at the end of the week or sometimes they expire at the end of a quarter of a month. Therefore the trader must keep in mind when they expire because they can lose their entire investment.
Any trader that wants to make profit must know that a Call Option has three characteristics: The first one is related to its price and it is represented by the price at which the stock is bought, if the trader has just bought a Call Option. The second one is related to the date at which the Call Option expires and is represented by the expiry date, the date when the option do not exist anymore or it becomes worthless if the trader do not exercise it. The third one is related to the right of the trader of buying the stock.
Well, the Call Option is the right that is given to the trader to buy a stock at a fixed price. There are two kinds of options. If the trader decides to buy that right we can talk about a Long Call and if the trader decides to sell that right we talk about a Short Call. If we talk about selling the trader must know that this movement involves a huge risk but at the same time, if the trader anticipated well the evolution of the market, it can be a good way for him to become profitable. There can be sold two types of Call Options: uncovered and covered calls.
What is the uncovered call? Well, it involves a huge risk because the trader sells the calls against stock that he does not own. Therefore, the trader must be very carefully when he decides the initial price of the call because it is very relevant for the profit or on the other hand, the losses of the trade that had been made. That`s why it is not recommended for the novices because it is risky and needs experience in this field.
What is the covered call? It is named covered because the trader is owner over the stock. It is very popular because it gives the possibility to the trader to have more incomes generated by the periodic selling of call options. In this type of calls the amount of money that a trader can receive is limited, but he can have a large profit if the price of the stock rises substantially.
Anyway, before starting to trade, even if we talk about a novice or an experienced trader, he must know that in the real market of Binary Options the price of an asset can go in three directions: it may go up, when the trader has three possibilities of trading in order to make a huge profit. He can buy the stock, he can buy Call Options on the stock or he can write Put Options on the stock. The second direction in which the price of an asset is going down or it can stay at the same limit.
The Call Option is a good financial instrument of making profit for those who are in this field. Obviously if the traders are novices in this world, they should know that some types of Call Options are very risky and they should be a little bit disappointed if they start trading in that way. If we talk about experienced traders they have to be able to anticipate the evolution of the market in order to know in which direction will go the prices. Call Option is a good way of making an investor a profitable trader.
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