In financial markets, an option is considered a derivative product. Its value depends on the underlying asset to which it is tied. The option is the right contract to buy or sell an asset at a specified price for a given period of time on payment of a premium. You will need the crypto widget for the proper usage of the whole market and the cryptocurrency products now. Bes sure of the perfect options for you. The bets start around a hundred euros. In practice, the investor must position himself on the direction that the underlying asset will take before the expiry of the option:
- If it considers that the price will focus on the rise, he buys a call option.
- It made the opposite bet, that is to say that the price will fall and he buys a put option.
The bets take place over a predefined period, usually of short duration. It goes from a few minutes to a few hours. When the option matures, the initial price of the underlying and its discounted price are compared to establish a gain or loss situation.
Good to know: according to an AMF survey conducted in 2019, investors betting on binary options are losers in 9 out of 10 cases. The AMF regularly lists unauthorized sites to offer such investments.
The imagination of financiers is limitless. Several types of binary options are available. Among the main ones are:
The High or Low option: with this option, also called cash or nothing, the investor bets on the value of the underlying for example the CAC 40 index at the end of the year.
Option
This value will be either above high or below low of the original price.
Example: the investor opens a High or Low option on the price of the CAC 40 on the rise. The initial course is 4,200 points. Two possible outcomes after expiration: the price closes above 4,200 points and wins the contract. Or the ACC below the threshold of 4,200 points and it does a cross on its stake.
The One touch option: this type of option consists of deciding whether the underlying asset will reach a previously defined rating during the life of the contract.
Example: the investor opens a one touch option on the price of oil. The initial price of the barrel of WTI is 33 dollars. The target quotation is $ 36. This left or double has 2 possible outcomes: the price reaches the threshold of 36 dollars and the bettor pockets the bet. This level is not affected and he abandons his bet.
The Zone or Boundary option: In this case, the investor must decide whether the underlying will be inside or outside a predefined area by a broker.
Example: the investor opens an option Zone on the price of gold. The initial price is $ 1,200 an ounce. The area defined by the broker is between $ 1,200 and $ 1,220. If the price of the yellow metal fluctuates between these two limits when the option expires, the investor receives a profit. If the price of gold is less than $ 1,200 or more than $ 1,220, it loses.