Binary Options Put Option (Down) definition

Binary Options Put Option (Down) definition

Binary put options are tradable financial instruments. They are products in which both buyer and seller are involved.

Knowing that when trading binary options, you do not own an asset is essential. Instead, you are betting on the price of the asset. Therefore, you bet on the market trend, whether the price will rise or fall within a certain period of time. If the guess is correct, the buyer wins and thus earns a profit.

How does a binary put option (down) work?

A “put option” is a type of security that a trader buys in exchange for paying a small fee. He does so if he believes that the index may fall. It gives the option holder the right to sell a specified amount of securities at a specified price within a limited time.

This put option is used to make maximum profits in the best case. Here, the buyer can set the selling price if he expects a decline in the underlying market.

Since the trader has the right to sell the option to someone, it is called a put. Since it gives the person holding it is a right to sell, it allows him to set a minimum price.

However, the trader is not obliged to sell at the minimum selling price. For example, if the market price is higher, he could sell it without claiming the “minimum selling price.”

It is easy to understand how a binary put option works. When expiration is over, the loss or gain is automatically credited or debited to the buyer’s account.

When trading, you encounter a volatile market. Traders can refer to various binary options trading indicators and binary options strategies to back up their predictions.

Read other important articles in the binary glossary.

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