OptionFair binary options trading have become hugely popular in the recent days. The reasons are many. It is simple and easy to understand; the rates of returns are very high; it requires small investment and it is the best way for a lay person to participate in international commerce. However, though you do not require any expert knowledge, a rudimentary idea is essential if you want to make informed choices while trading binary options. A binary options glossary will help you to gain these ideas.
Some terms from a typical binary options glossary
Here are some terms of great importance that you are likely to find in a binary options glossary:
The basic term of course is binary option. This implies a trade where the amount of return is fixed from the outset. If you are correct, you already know how much profit you will make. Similarly, you also know the loss that you might incur if you turn out to be wrong.
Another common term in a Binary Options Glossary is expiry. This implies closing the trade in a particular asset. Every option has its own expiry time which you should confirm at the time of investment.
The market price is the current price offered for the asset in the market.
Two terms of binary options glossary which are of great interest to traders are in the money and out of the money. The former implies that the trade has ended in a profitable manner while the latter imply that it has ended in a loss.
The asset on which the broker offers an option is known as underlying asset.
Another interesting term of binary options glossary is early closure. It is the ability of the investor to close an open position. As a result the option expires at once.
If you are looking for slightly advanced ways to trade binary options, then you should know about boundary options. This term indicates a specified range. The trader will have to predict whether, at the time of expiry, the price of the asset will fall within or outside this range.
The most common instrument used in binary options trading is the high/low instrument. Here, you will simply have to choose whether the price of the asset will be high or low than the limit specified by the broker at the time of expiry.
Another term of binary options glossary that traders will love is refund. Many binary options brokers offer a return of 15% even on trades that expire out of money. This is known as refund.
Learn more as you trade to increase profitability
Though binary options trading are highly suitable for the newcomers, there are a number of advanced trading options as well. Study the binary options glossary regularly to improve your knowledge of binary options trading and earn even more profits in the future.
Binary Options Glossary
Trading with binary options, as you probably know, requires you to be a real pro in all of the terms and basic rules of this activity. For this purpose it is strongly recommended that you become aware of those words with important meaning which you will encounter during your trading activity. Be aware that most binary options brokers provide some glossary packs too, but in most cases this pack of terms is usually quite limited. We are about to disclose to you everything that you really need to know, so if you are motivated and focused enough, let`s get started with the quick and effective education course now!
Common Glossary For Binary Options Trading – Basics
Let`s begin with some of the most common terms from the binary options trading glossary. After all, proper and gradual learning is the most optimal course. Besides, by studying the glossary step by step, it will be easier for you remember the most significant words from the binary options glossary!
The asset is the underlying tool or instrument that is chosen for binary options trading contract determinations. Assets can include stocks, indices, commodities and the different currency pairs you trade with.
At the money
With this term, we talk about the instant in time, in which the targeted value of a binary option becomes the same as the price of the underlying asset selected by the trader.
The current price is the value (the amount) that is determined in almost real time and it is the opposition of the most price information that is in many cases delayed by a particular period of time – about 15 minutes.
Time of expiration
Usually known as expiry time, with this term we point to the date or the time, when the value of the underlying asset will be compared to the strike price in order to form the final outcome or your payoff. At the expiry time (time of expiration) the binary option you traded then becomes void and ceases to be traded.
In the money
If a binary option is in the money, then it has value upon the expiry time. Usually, a put binary option is in the “in the money” status when the underlying security price is below the strike price. Alternatively, a binary call option becomes “in the money”, when the underlying security price goes above the strike price.
Speaking of strike price above, let`s figure it out what this term means. The strike price, in a few words, is determined by the underlying security price at the very moment when the binary option is purchased and the contract is made. Once the binary option reaches its expiry time, the underlying security price must be compared to the strike price in order to see if the binary option has won, or lost its value, or in other words whether it is in the money or out of the money.
The payout is the value of money that you as a trader receives as a profit from binary options trading activity as to a particular binary trade.
This is a kind of a tool that is applied by the traders in order to make the prediction about the underlying asset value – and to be more specific, whether this value will expire during or out of the set of ranges – simpler and quicker.
Glossary Terms for Advanced – Learn the Following, too!
Even though a little bit more specific, the following terms from our glossary are also important to be learnt, known and applied during your binary options trading activity. We divide our specially tailored glossary in two parts in order to simplify it for you, and to offer you a quick pause during your learning process. But let`s not lose any more time, and begin with the next portion of significant binary options additions in our fantastic and helpful glossary!
This is where the market (that is usually referring to a financial or stock market), prices are almost in all cases in a downward trend.
This is where the market (that is usually referring to a financial or stock market) prices are almost in all cases in an upward trend.
Commodities are the types of assets that you can purchase a binary option to trade in. In general, the commodity is a physical object and it can be a precious metal – gold, silver and etc – as well as a manufacturing resource like cotton or even petrol. The price of each of the commodities we have chosen (and the rest of them) is determined according to many economic factors and changes.
Currency is another asset that you can trade with. Note that currencies usually come in pairs, and the most common among them – USD/GBP, EUR/CAD and etc – may be found in almost any binary options broker.
The currency price is the other name of the market price term. This is the present value of the underlying asset and it is always announced in real time – i.e. with no delays by the financial information provider.
The deposit is the amount of money you invest with a binary options broker, when you complete a registration and create an account. This is the total value you put into the brokerage e-wallet of yours to make trades with.
The early closure is the moment when the traders receive the possibility to close a binary option which then, instantly causes it to expire, ceasing the contract.
With the glossary term index binary we describe the binary option which has underlying an asset that is measured to an index. Such binaries can be understood by these examples: Dow Jones, FTSE-100 and etc.
When you purchase binary option to trade it, you pay a particular value and this is the investment amount. These amounts – prices – vary according to the binary option, the market, as well as the broker you are signed with – from $1 to $1000.
Popular in trading experience in general, this glossary term refers to the entire (or a part of) amount of your investment you have returned to you in a situation when the binary option expires at the money.
The return amount is the amount that you earn right after the purchased binary option expires in the money. The return value ranges according to the instrument you have traded with your binary. The particular asset you have chosen, as well as the broker type you are trading on, also affect for the return value. Since the return value is always pre-determined, you know in advance the eventual loss or profit you will get from the purchased binary.
A type of asset, this is the financial share of a company – for instance Microsoft, Samsung, Twitter – and etc which you trade with.
When you reach a moment that you have earned a fair sum of money from your binary options trading activity, then, you will want to have this money withdrawn from your brokerage account and deposited in your your debit card or bank account. To receive this money, you will have to make a withdrawal. Note that the withdrawal methods and terms and conditions are different between brokers, and depend on the broker you are trading in with binaries.
With charting you practice plotting a binary option value at some very beneficial moment of time. Charting in general is a tool and it is a way of trading with binaries. The main purpose of charting is to be helpful with technical analysis.
And since we have mentioned it, let`s explain the technical analysis term, too. This is the analysis – and the usage of it – when you want to undertake research in advance and to find out additional data points in order to make your prediction of the prices and the market movements of the assets you have chosen more optimal and profitable.
Feel free to start your learning course with our helpful and very useful binary options trading glossary now! We are sure that it will be very supportive to your overall education in the field, so do not lose any more time and start learning right away! Good luck!
Binary Options Glossary
Below you can find an extensive Binary Options glossary with the binary options terminology that you will encounter regularly.
Asset The instrument on which the trade is based. Binary options are traded based on currency pairs, stocks, commodities and indices.
At The Money When the price at expiration equals its strike price. Normally, you won’t win or lose anything in this case.
Boundary or Range Option Instead of the usual call option or put option, you speculate that the price of the underlying asset will remain within a predetermined bandwidth.
Call Option With a call option you speculate that the value of the underlying asset will increase.
Commodities Commodities are raw materials used in the production of goods. Well-known commodities are gold, silver, palladium, oil, copper, grain, cocoa etc.
Digital Option A digital option is another term for a binary option.
Early Closure Early Closure is a possibility that some binary options brokers offer. With early closure you have the option to close your binary option before the original expiration time. Thus, you can decide to take a lower guaranteed profit or to reduce your loss.
Exotic Options Exotic options are simply more complex versions of binary options. These are used by major merchants before being made available to the public.
Expiry Price The expiry price is the value of the underlying asset when the option expires.
Expiry Time or Expiration This is the date and time when a binary option expires. These can vary widely but the most common expiration times of binary options are often end of day, one hour, 45m, 30m 15m, 10m, 5m and even 60 seconds.
Forex Forex is just an abbreviated term for Foreign Exchange. The Foreign Exchange market is the second largest in the world and involves all global currencies.
Fundamental Analysis Fundamental Analysis is used by many traders to estimate whether the rate of an asset will rise or fall. Examples of fundamental analysis are the analysis of macroeconomic figures, central bank and government decisions, growth rates, inflation figures, even the weather.
Futures Futures are basically the same as options but often with longer contract duration and more flexibility when it comes to interim sales.
Hedging/Fencing Hedging means buying an asset or option with the aim of reducing the risk of another investment. Binary options are considered an ideal hedging product as the risk and payment are already known in advance.
High/Low Option This is the most common form of binary options specifying whether the price of the underlying asset will rise or decrease within a predetermined time limit.
Index/Indices An index is a grouping of stocks.
In-the-money In-the-money is a term used to describe when an investor achieves a profit.
Instrument An instrument is another term used for an asset. Examples of assets are commodities, stocks, indices and currency pairs.
Low 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 With a No Touch option, you speculate that the price of the underlying asset will not reach or exceed a predetermined price level during the term of the option.
Out-of-the-money If a trader is out-of-the-money, it means they have experienced a loss.
One Touch With a One Touch option, one speculates whether the asset value will reach a predetermined price level before the option expires.
Outbound Option This term is an option on a Boundary/Range Instrument and refers to when the underlying asset expires outside the higher and lower limits of the target prices.
Payout The payout is the profit made when an option expires as expected and is in-the-money.
Put Option Traders use a put option if they believe that the value of the underlying asset will expire at a lower price.
Range Option Instead of the usual call option or put option, you speculate that the price of the underlying asset will remain within a predetermined bandwidth.
Refund The refund is how much money is returned to the investor if an option expires at-the-money. How much the refund is depends on binary options broker.
Return A return is how much money is given to the investor if an option expires in-the-money.
Strike Price This is the price at which the binary options broker is willing to sell the option.
Target Price This is the same as the strike price, so the price against which the binary options broker is willing to sell the option.
Technical Analysis Technical Analysis involves studying patterns of market prices.
Touch Option With a Touch option, you speculate that the price of the underlying asset will reach a predetermined price level within the term of the option.
Underlying Asset The instrument on which the trade is based. Binary options are traded based on currency pairs, stocks, commodities and indices.