Most people who offer option trading courses teach beginners about calls, puts and binary contracts. This is the case because most option traders use these trades each day during the course of a normal trading session in the American stock markets, American bond markets, the FOREX market and other American asset markets.
Therefore, let’s review how calls, puts and binary contracts are used by American options traders during the course of a normal trading session.
Call Options Are Used to Profit on Increasing Asset Values:
A call option is a short-term contract that gives the buyer of the contract the right to buy an asset at a prescribed price before or near a prescribed time. The value of a call option increases in American asset markets whenever the value of the option’s underlying asset rises during a call option’s duration. This is the case because the value of a call option increases in American markets whenever the value of the call option’s underlying asset is greater than call option’s prescribed price.
Put Options Are Used to Profit on Decreasing Asset Values and to Hedge Against Lower Asset Values:
Put options are option contracts that give the owner of the contract the right to sell an asset at a prescribed price before or near a specific time. Investors often purchase these option contracts to do the following things:
To Make Money on Sudden Decreases in Asset Values that Occur During a Normal Trading Session:
This is hardly surprising because most asset markets experience a decrease in asset values frequently during the course of a normal trading session.
To Hedge Against a Prolonged or Sudden Decrease in Asset Values:
This is the case because an increase in the value of a put option can often offset most of the decrease in the value of a put option’s underlying assets.
Binary Options Offer Traders a Chance to Profit Quickly on Small Changes in Asset Values:
Binary options are short-term option contracts that usually expire within one week after they are written. These short expiration dates appeal to many traders because they enable savvy traders to quickly profit on the small changes in asset values that occur frequently during the course of a trading session.
We offer online option trading tutorials that can help you improve your ability to use these trading techniques in American asset markets. For more information about these option trading tutorials, please contact us today for more details.