Binary option terminology. Boundary: This is a binary trading option that allows a trader to speculate the movement range of an asset over a predetermined time. Finishing within your chosen range will mean you finish “In the money.” Broker (Online): An online Forex or Binary Options company that acts as source for traders to trade online.

Binary option terminology

What Are Binary Options Binary Options Trading Terminology

Binary option terminology. Check out our glossary of the most common types of terms and phrases in binary options trading. All are explained in a simple way for anyone to understand.

Binary option terminology


Nothing leads to an unsuccessful trade faster than misunderstanding a term or sentence. So we have put together a comprehensive list of the commonly used terms along with lesser known references that you might find useful. Simply click the term and it will expand with a definition. Often called an underlying asset this refers to the type of item that you are trading on.

This is the asset in which you are purchasing an option against. Examples of assets include: This term refers to the position in which the option is in when it expires neither in-the-money or out-of-the-money but at the same price at which it was purchased target price. In this situation there would be a neutral gain. The terms bearish is used to describe a financial market or stock who's price is generally on a decline. Binary options, also known as digital options, or all-or-nothing options, are contracts which have only two possible outcomes - either they win, or they lose -- therefore binary by nature.

A binary option involves a fixed payout after the underlying stock meets or exceeds its predetermined threshold or strike price. Binary call options pay the predetermined amount providing the price of the underlying security exceeds the strike price at expiration.

Similary, binary put options pay the predetermined price if the price of the underlying security is trading at less than the option strike price at expiration. The term boundary or range instrument allows a trader to decide whether the price of the underlying asset when the option expires will be inside or outside a specified range.

The range is specified by higher and lower target price limits. A broker is someone or a company acting as an agent in where they make a contract between a trader and themselves in respects to purchasing options. Examples of brokers include: Each broker has a different set of assets available to trade and details specific to them.

The terms bearish is used to describe a financial market or stock who's price is generally on an incline. Choose binary call options if you predict that the value of the item you are trading at will increase in price by the time of your chosen expiration. If the strike price increases in that time, you earn money based on the percentage set prior to bidding. This refers to one of the underlying asset types in which options can be purchased.

A commodity is usually a physical item like Gold, Silver, Wheat and Cotton and the price of these is determined by economic factors. A currency is an asset type that can be traded. Currencies are traded in pairs and common examples of these are: In order to start trading you need to add funds to your trading account. This adding of funds is called a deposit.

Early closure is where a trader has the ability to close an option and immediately expire it ceasing the contract. This refers to the time and date at which the option you have purchased will expire. When the option has expired it becomes void and ceases to trade. With binary options, expiry times are shorter than traditional investments and can be any of the following, 60 seconds, 15min, 30min, 45min, 1hr, 24 hr and weekly. If you choose High Call you are predicting it will arrive above and if you select Low Put you are predicting it will arrive below the target price.

Index Binary refers to an option whose underlying asset is that of an index. These can include such assets as: Often referred to as Financial Instruments or Assets, it is another term which refers to the underlying Stocks, Commodities, Currency Pairs or Indices.

This term refers to the point when a purchased option realises a gain and the trader makes a profit. An option is in-the-money if you place a High Call option and the options price expires above the target price. If a Low Put option is placed then you are in-the-money when the options price expires below the target price.

This is the amount of money that is invested when purchasing an option. This is an option on a One Touch instrument. It refers to when the price of an asset does not reach the target price during the lifetime of the option. If at any time the price of the asset does reach the target price it will instantly expire 'out-of-the-money'. A one touch instrument is where you predict whether the underlying assets value will reach a target value when the option expires.

If it does reach the target value then you are 'in-the-money' otherwise you fall short and are 'out-of-the-money'. This term refers to the point when a purchased option has no gain and the trader makes a loss on their investment.

An option is out-of-the-money if you place a High Call option and the options price expires below the target price. If a Low Put option is placed then you are out-of-the-money when the options price expires above the target price. Choose binary put options if you predict that the value of the item you are trading at will decrease in price by the time of your chosen expiration.

If the strike price decreases in that time, you earn money based on the percentage set prior to bidding. A portion or the full amount of your investment you make is often refunded if your option expires ' at-the-money '. Check each broker for refund options.

This refers to the amount you stand to make after the option you have purchased expires in the money. Returns can depend on the instrument you are trading with along with the specific asset and different brokers. The return value will be clearly stated before you purchase your option so you always know what you stand to gain or lose. A stock refers to the stock of a specific company which are available to trade on the financial stock market.

Examples of stock include: The strike price often referred to as purchase or target price refers to the price of the underlying asset at the time at which you purchase the option. The type of asset refers to which financial category each asset falls into. The main asset types that are available to trade in are Stocks, Commodities, Indices and Currencies. Examples of asset types and their assets are listed here:.

After making successful investments it's time to take the money back out of your trading account, this comes in the form of a withdrawal. A withdrawal can take some time depending on the broker and also cost depending on which method you have chosen to withdraw your funds with. We use cookies for your improved experience. By using our site you agree to the use of them. Get to know your binary option terms Nothing leads to an unsuccessful trade faster than misunderstanding a term or sentence.

At The Money This term refers to the position in which the option is in when it expires neither in-the-money or out-of-the-money but at the same price at which it was purchased target price. Bearish Market The terms bearish is used to describe a financial market or stock who's price is generally on a decline. Binary Options Binary options, also known as digital options, or all-or-nothing options, are contracts which have only two possible outcomes - either they win, or they lose -- therefore binary by nature.

Broker A broker is someone or a company acting as an agent in where they make a contract between a trader and themselves in respects to purchasing options.

Bullish Market The terms bearish is used to describe a financial market or stock who's price is generally on an incline. Call Choose binary call options if you predict that the value of the item you are trading at will increase in price by the time of your chosen expiration. Commodities This refers to one of the underlying asset types in which options can be purchased.

Currency A currency is an asset type that can be traded. Deposit In order to start trading you need to add funds to your trading account. Early Closure Early closure is where a trader has the ability to close an option and immediately expire it ceasing the contract. Index Binary Index Binary refers to an option whose underlying asset is that of an index. In The Money This term refers to the point when a purchased option realises a gain and the trader makes a profit.

Investment Amount This is the amount of money that is invested when purchasing an option. No Touch This is an option on a One Touch instrument.

One Touch A one touch instrument is where you predict whether the underlying assets value will reach a target value when the option expires. Out of The Money This term refers to the point when a purchased option has no gain and the trader makes a loss on their investment.

Put Choose binary put options if you predict that the value of the item you are trading at will decrease in price by the time of your chosen expiration. Refund A portion or the full amount of your investment you make is often refunded if your option expires ' at-the-money '. Return This refers to the amount you stand to make after the option you have purchased expires in the money. Stock A stock refers to the stock of a specific company which are available to trade on the financial stock market.

Underlying Asset Types The type of asset refers to which financial category each asset falls into. Examples of asset types and their assets are listed here: Google Inc, Apple Inc Commodities: Gold, Silver, Crude Oil Indices: Withdrawal After making successful investments it's time to take the money back out of your trading account, this comes in the form of a withdrawal. Best binary options brokers 10Trade Review.


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