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Upbets v Calls

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In Fig 1.7.1 the price of the upbet and call are both 25 and both are worth $1 per point. Clearly the upbet’s profit potential is limited to $75 with the ‘draw’ generating a profit of $25.

For the conventional call there is no limited upside, with the 45° profit line travelling upwards from –25 through breakeven, through 75, through 100 and upwards out of sight. But this increased potential profit comes at a cost, of course, because at any underlying price between A and B the conventional call performs less profitably than the upbet. At A, the upbet makes a 100% profit and turns a $25 bet into a $25 profit whereas the conventional option loses the full premium of $25.


Binary Options

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