The ‘Higher / Lower’ binary option is also known as the ‘Call or ‘Put’ contract within the industry. It is the most commonly offered digital trading contract. It is can also be referred to as the ‘classic’ contract as it is the basis on which digital binary trading was first founded.
The Call and Put names are used to describe what amounts to the reverse of the same contract. The choice of which to use will come down to the direction in which you think the price of the asset is heading.
- The Call option ( Higher) is used when you expect the price of the asset to rise over the duration set on the contract.
- The Put option (Lower) is used when you expect the price of the asset to fall over the duration set on the contract.
As these are the most widely used contracts in binary trading, as you would expect, you will find the widest range of assets available for trading with them. For example, you will find a wide range of Stock Indices, Forex pairs, Commodities and individual company contracts offered by most brokers.
Most trusted binary options brokers offer a wide spectrum of different expiry time lengths that you can use with these contracts.
The most common expiry times offered are usually at the end of every hour or at the end of the trading day. Increasingly however, brokers are offering more granular ending times on these contracts. Fifteen minute and thirty minute contracts are now available with the majority of brokers. Moreover many are now offering expiry times of just seconds. Thirty and sixty second contracts are now commonplace. These are covered in more detail here.
One of the major advantages when using the higher / lower option is that you don’t have to be precise in your prediction as to exactly where the price of the asset end. You only need to be able to predict the direction of its next move. Provided that the price finishes higher or lower than the strike price , you earn the fixed profit that was agreed upfront with the broker.
To make regular money from binary options you will most likely make use of these contracts as the mainstay of your trading. They are the easiest to understand of all the contracts and can be used to profit from potential moves in both slow and fast markets.
The Call and Put contract are best suited to trading when there is high volume in the market and you expect the price of the selected asset to either rise or fall strongly.
Here’s an example of how you would use a Higher/ Lower Binary Options Contract:
The price of oil is currently at $100. You could place a Call contract if you expected the price to finish higher than this level in one hour (contract expiry time). A Put contract would be placed if you expected the price to finish lower than this level.
The payout is made when the contract expires if you have been able to successfully forecast the direction of price movement.