What is the difference between traditional and classic options? This question is just beginner who want to start trading. Although both options are speculating on the price performance of an underlying, there are significant differences. One of the biggest differences is that classical options are traded on the stock exchanges, while binary options are OTC products (“over the counter”). This means that they are traded over the counter website here when between the seller (broker) and the buyer. Thus, they are also not tied want read here to specific times.

General to Classic Options

As a rule, a price limit (stop loss) is defined for the classic options. When this limit is reached, the options are sold so as to limit possible losses. Depending on the price development, the stop loss can also be trailed (trailing stop loss). In contrast to binary options, the profit for the classic options is not fixed until the sale of the option. Those who do not control stop-loss management must expect high losses. The loss can even exceed the capital invested, for example, a short call comes.

This is the sale of the purchase option, for example for a share. The sale can be executed at a specific time (expiration date) at a specific price. However, the seller of a short call is obliged to sell the share (or another underlying) try these guys then at a pre-determined price (exercise price). Although this obligation does not need to occur, the investor receives a certain premium.

The counterpart of the short call is the long call. It is important that each long call also has to face a short call, whereby a distinction is made between covered and an uncovered short call.

If the investor does not have the underlying to which the option is sold, an uncovered check my source or short call is used. However, for this the investor must deposit certain collateral, so that the loss may exceed the total capi- tal use. A covered short call is, of course, the case when the investor has the underlying. The risk is resources come enormous and the profits are only achieved by the premiums.

Next there is the difference in options trading that there are American and European options. European options can only be exercised on the expiration date and American options only during the term.

Conclusion

As a matter of principle, investors have to constantly monitor the prices and react quickly. As a result, classic options can only be traded at high time. It is also disadvantageous that this type of trade has become more and more complicated over check over here day the last few years, so that even the professionals quickly reach their limits. For trading newcomers, the classic option trading is absolutely not recommended.

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About binary options

A big advantage when using binary options is that the profit and loss is already determined in advance. It is equally advantageous that investors only have to make a decision as to whether an event has occurred at the end of home other the option period or not. Anyone who has executed his order does not have to do anything except wait. It is not necessary to monitor the courses or to sell them at an early stage.

If the forecasted event occurs, the investor achieves a pre-determined yield. In the loss loss he simply loses his bet. The risk is relatively straightforward.

For the binary options, there are different types of trade, as are the classic options, but they are relatively easy to understand. One you go now of the best-known trading types is the call and put options. Here the investor speculates whether the price of an Underlying rises within a certain time (call) or