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Binary Options Trading Glossary

Binary Options Glossary - Important Definitions for Binary Options Trading Success.

Binary Options GlossaryAsset Class
An asset class is a category of commodity, stock or index. Within each class, there will be different kinds of assets to trade using binary options

Asset Value
The asset value is the current price of the underlying asset at any given time.

This is a term used to describe when the value of an asset is generally the same now as it was at the time when it was purchased.

Binary Options
A binary option allows traders to earn a fixed profit if the value of an underlying asset is either above or below a set strike price in a specific, predetermined amount of time.

Boundary or Range Option
A boundary or range option allows a trader to decide if the value of an asset will be within a certain specified range at the time of expiration, or not. The range is made up of an upper and a lower target price limit.

Call option/call contract
A call option is one of two choices available to a trader purchasing a binary option. If the trader feels the value of the underlying asset will increase to a certain level before a certain date, they should consider the purchase of a call option.

Commodities are raw materials used in a wide variety of economic sectors. Examples would include crude oil, grains, or iron.

Current Price
The current price is the price of a given asset right now. Current prices can be delayed by at least 15 minutes.

Digital Option
A digital option is another term for a binary option.

Early Closure
If a trader chooses an early closure, it means they are able to close an open position so the option expires immediately.

Expiry Price
An expiry price is the price of the underlying asset when the option expires.

Expiry Time
The expiry time is the set date and time when a binary option expires. It can be set to the month, day, or even the hour, depending on the contract.

Exotic Options
Exotic options are simply more complex versions of binary options. They are used by the major traders before they are available to the public.

Forex is just an abbreviated term for the Foreign Exchange. The Foreign Exchange market is the second largest in the world, and involves all global currencies.

Futures are a class of indirect securities which are contracts to buy or to sell a specific commodity at a set time down the road. Futures can be strict, which requires the holder to buy or sell the said commodity, while futures options allow for choice.

Fundamental Analysis
Traders use fundamental analysis as one of their most important tools. It involves comparing a wide variety of macroeconomic data, from decisions by central banks and governments, to inflation and growth measurements or even weather events. The analysis of this kind of date helps traders determine whether the value of assets is heading up or down.

Hedging means buying an asset or option in order to reduce a trader’s risk from another investment. Options are considered ideal for hedging because the risks and payouts are set.

A high is an option in which the trader is assuming the underlying asset will rise to a price higher than the target price.

High/Low Option
A high/low option gives an investor a set payout if the underlying asset hits a certain price that is either higher or lower than it was at the beginning of the trade, providing that particular option or trade expired “in the money.”

An index is a grouping of stocks.

This is the range set by the trader to establish the final position at the expiry date’s option.

Investment Amount
This is the amount of money spent by the trader to buy the contract for the binary option.

In-the-money is a term used to describe when an investor achieves a profit.

An instrument is another term used for an asset.

The term “low” refers to a trade or an option that a trader feels will expire at a price lower than the target price.

Market Price
The market price is the price that reflects the current value of an underlying asset.

No Touch
A no-touch is an option that does not reach or surpass its target level.

Over-the-counter assets or products are sold directly between two parties. This is different than trades that go through intermediaries such as brokers. Binary options are mostly sold as over-the-counter products.

If a trader is out-of-the-money, it means they have experienced a loss.

The payout is the profit made when an option expires as expected, and is in-the-money.

Put Option
The put option is one of the two choices for binary options. This is what a trader chooses if they believe that the value of the underlying asset will expire at a lower price.

Range Option
When a trader uses a range option, they must decide whether they feel an asset price will either be in or out of a certain set range by the expiry date. This is a popular option type because it is seen to be very effective in hedging.

The refund is how much money is returned to the investor if an option expires at-the-money.

A return is how much money is given to the investor if an option expires in-the-money.

A stock is a share in a specific company that is available for purchase.

Strike Price
The strike price is the final price at which a binary option can be exercised.

Target Price
This is also known as the strike price or purchase price. This is the price at which the broker is willing to sell an option.

Technical analysis
Traders use technical analysis to trade in financial markets. The analysis involves studying patterns of market prices.

Time of Expiration (Expiry)
This is the date and time when an option expires.

Touch Option
A touch option gives a trader a predetermined payout if the trader chooses either a touch or no-touch outcome. In a touch option, a trader will get a payout if an option reaches or surpasses a set level just once during a specific period of time. If the level is never reached even once, the investment is lost. A no touch option will provide a payout if the asset never reaches or surpasses a predetermined level during a specific period of time.

This is an option that pays out when the asset reaches or surpasses a predetermined level.

Underlying Asset
The underlying asset is the center of the binary option. It could include a currency, stocks or commodities.


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