Different Types of Options on the IQ option platform

Posted by ilie@123 on April 6th, 2021

Let’s start with, what are options? It is nothing but a contract that provides you with the right to buy or sell an asset at a present price at a specified moment of time in the future.

Example of an option
Understand it with an example, consider a company ‘A’ that sells petrol. We can say that our product is oil and the cost of oil changing constantly and the cost price of petrol includes among other things the cost of oil. So, in order to mitigate the risk of an oil price increase, the company decides to use an oil options contract.

Now the question arises, how does the option contract work? So, consider that cost of oil is 100 dollars per barrel. ‘A’ company goes to a broker and concludes an options contract for purchasing oil at 100 dollars next month.

The company will pay the cost of the option contract to the broker which is also called the option premium. Consider that the option premium is 10 dollars. Now let’s study two scenarios.

After a month the price of oil rises to 200 dollars per barrel. As company ‘A’ has the option contract for purchasing oil at one hundred dollars and buy oil at the agreed price of 100 dollars. Here the ‘A’ company saves one hundred dollars per acquired barrel.

But in the case when the price of oil drops to 50 dollars, there is no point in buying oil at the agreed price of 100 dollars because the commodity is available at fifty dollars on the market. So in this case what company will do that it pays only the option premium to the broker.

Specific terms for trading options
Options trading has its specific terms:

When a trader buys an option it is the purchase time.
The predetermined point in the future after which an option ceases to exist is the expiration time.
Options premium is the price of an option contract
The strike price is a target level that the opening price of an asset should go above or below for the position to close in the money.
Main types of options at IQ Option
Options have two main types. Call Options that ‘calls’ and put options that ‘puts’. You can buy an asset with a call option and a put option gives you the right to sell an asset.

Options trading at IQ Option
There are many variants in the Options at IQ Option platform as it is a popular trading instrument. You should predict the asset price direction if you choose binary options trading to see whether the price will go up or down compared to the opening price.

To manage your risk more efficiently digital options allow you to choose strike prices.

You can exchange one currency for another at a preset exchange rate at a specified moment in time in the future with foreign exchange options or FX options. You can trade binary options, digital options, and FX options. on the IQ Option platform