As we are all aware, the two options available in binary trading are call and put options. In this article, we will focus greater light on using call options in commodity trading and its pros and cons.
Basically, a call option is purchased when the trader is of the view that the price of an underlying asset will experience a rise over a period of some hours or days which therefore becomes the expiration period of his contract. Thus supposing, an investor feels that there are more chances that there will be an upward shift than a downward shift in the current market price of say gold, then he will accordingly opt for call option.
Once such a contract has been established, the trader stands to win his transaction if the price of gold experiences an increase of even pip by the end of the expiration period. Hence, call options are considered extremely lucrative and comparatively safer since there are certain commodities whose price rarely ever falls. Moreover, since it is binary option trading, an investor is not bound to lose more than what he has invested if his prediction turns out to be wrong, which happens less often than a prediction turning out correct.
However, what people often forget about call options is that even if the chance of losing a bet stays low, there does exist a possibility which cannot be ignored. Especially when the commodity market is highly volatile, call options serve to be a dangerous choice because of the trust that they have already gained from all investors.