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Binary options : high / low or call / put

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As we already explained it to you on several articles of the website, High / Low binary options (also called binary CALL options and binary PUT options by some brokers) are the most popular type of binary options. Be careful, this kind of binary options are different from traditional options. There exist other types of binary options (“One Touch”, “Zone”…) that are explained and reviewed on the “Types of binary options” section of the website. For the sake of simplification, the generic term “binary options” mentioned on this website will always refer to HIGH/LOW binary options (Unless otherwise specified).

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Definition of HIGH / LOW binary options (also called CALL / PUT)

If a trader has a bullish view on an underlying asset (he believes the price of the asset will go up), he will invest on a HIGH binary Option (Call option) and will generate a profit if the asset price went up between the opening of the position and the maturity. If a trader has a bearish view on an underlying asset (he believes the price of the asset will go down), he will invest on a LOW binary Option (Put option) and will generate a profit if the asset price went down between the opening of the position and the maturity. Most of binary option maturities are short-term (between 10 minutes and 1 day). Binary options are short-term trading instruments and are not relevant for long-term investment strategies.

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A CALL or HIGH option is considered IN-THE-MONEY (ITM) if the price of the underlying asset at maturity is above the initial “spot” price. In such conditions, the trader will earn the RETURN on his invested amount (returns always range from 60% to 85%). A CALL option is considered OUT-OF-THE-MONEY (OTM) if the price of the underlying asset at maturity is below the initial “spot” price. In such conditions, the trader will lose his invested amount. (he can also recover a “return on loss” proposed by most brokers)

A PUT or LOW option is considered IN-THE-MONEY (ITM) if the price of the underlying asset at maturity is below the initial “spot” price. In such conditions, the trader will earn the RETURN on his invested amount (returns always range from 60% to 85%). A PUT option is considered OUT-OF-THE-MONEY (OTM) if the price of the underlying asset at maturity is above the initial “spot” price. In such conditions, the trader will lose his invested amount.

Don’t hesitate to read our Binary Options: Definition and differences with regular options articles for further details and examples.

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