The most popular contract’s type in the binary options trading exists. These are classic digital options that assume determination of the price’s movement at the certain point in time. Digital options are Put and Call. For this reason, we will elaborate on what the Put option is.
Put option: what is it?
So, the Put option is the contract’s type that is bought by a trader, if a trader assumes that there will be the descending movement in the market. In other words, Put option is very similar to the asset’s sale in the Forex market.
In what cases a trader can buy the Put option? First off, in the situations when there is a descending trend in the market. It was mentioned above. But there are numbers of other causes for buying of this asset. For example, if the trend’s reversal downwards is starting in the market. In this case, it is desirable to wait until the confirmation signal and after that buy the Put option.
The buying of the binary Put options is also possible when a trader expects the breakout of important levels downwards. More specifically, support will be the important level for such type of contract in particular. If a trader assumes that such support will be unable to resist the price, he can buy this type of option.
Put option: what analytic methods can be used?
Many traders wonder when to buy the Put option. We have already replied to this question in the previous chapter. But in order to determine what the current situation in the market is, it is necessary to conduct an analysis. In order to buy the Put option, it is possible to use both technical and fundamental analysis. Let’s start from the second one.
In which cases can you buy the Put options? If the economic situation in the certain state is unstable, sell-outs of the certain currency can begin in the market. Naturally, it is an excellent reason to buy the Put option. You can also buy it when the central bank lowers the discount rate or launches so-called tapering program. Lastly, any bad news from the certain country can cause the situation when a market will start to sell currency of this country. For example, if the macroeconomic calendar has the certain news’ issue marked, a trader can get ready for trading. He has to look at what forecast is expected. The Buying of the Put option is possible when the news turns out to be worse than the forecast.
From the technical analysis’ perspective, binary Put option can be bought in accordance with the candlestick analysis. For example, appearances of such patterns like the shooting star, the hanging man, the bearish harami, the dark cloud cover pattern, and so on can cause it.
If you rely upon the chart’s patterns, appearances of the descending triangle, the double or the triple top, or such reversal pattern like the head and shoulders on the chart will be perfectly suitable for buying of the Put option.
Another reason to buy the Put option is an appearance of the certain bearish signals on the indicators. For example, if the trend indicator reverses after the ascending movement, you can buy the Put option. The same is applicable to the situations when the same trend indicator, for example, MA, continues to show the descending movement.
Buying of such option is also possible in cases when the oscillator reverses from up to down.
Therefore, the Put option is an important component of trading in the binary options market. Buying of this option is possible in all abovementioned in the article cases and in many other cases. If a trader assumes that the bearish trend will be developing in the market, he can buy the Put option confidently.