Glossary

Glossary

It is highly important for you to be familiar with the following terminologies before your start trading binary options. With the help of this glossary, you will be able to easily understand most of the terms that you might encounter in any trading platform.

At-the-Money

It is one of the terms that are used to define the status of an option’s ability to make a profit and in this case the investment amount is refunded because the price of an option has the same value as the underlying asset.

Binary Option

It is a particular type of trading that provides a fixed profit when the market forecast based on a simple yes or no is correct. For instance, you need to guess whether the price of oil will go up or down and a correct guess will give you a maximum payout of 85%.

Boundary Option

The trading instrument used wherein the objective is to guess whether the underlying asset will be able to attain a price that is inside or outside of a particular range at expiration.

Early Closure

Also known as Stop Loss, this feature allows traders to exit an option even before the expiry in exchange for a lower profit.

Expiry Level

This is the price of the underlying asset upon expiration.

Expiry Time

This is the time and date at which a binary option expires and the result of a trade is established.

Call/Put

The trading instrument used wherein the objective is to guess whether the underlying asset will be able to attain a price that is higher (Call) or lower (Put) than the strike price at expiration.

In-the-Money

It is one of the terms that are used to define the status of an option’s ability to make a profit and in this case the result is positive. The trade is in-the-money if price of an option is higher than the underlying asset when the Call was selected or if price of an option is lower than the underlying asset when the Put put was selected.

Investment Amount

This is the value or amount that is invested in a binary option.

Market Price

This is the current price or value of an underlying asset.

No Touch Option

A One Touch instrument that usually pays a maximum of 70% with a condition that the underlying asset’s price doesn’t reach the target price until its expiration.

One-Touch

The trading instrument used wherein the objective is to guess whether the underlying asset will be able to attain touch or surpass a specific price before it reaches expiration.

Out-of-the-Money

It is one of the terms that are used to define the status of an option’s ability to make a profit and in this case the result is negative. The trade is out-of-the-money if price of an option is lower than the underlying asset when the Call was selected or if price of an option is higher than the underlying asset when the Put was selected.

Returns

Also known as Return on Investment or ROI, this is the value or amount that is returned to the trader if the option has expired in-the-money. For example, if you invested $100 in an option that has an 80% return and it expires in-the-money then you will get a return of $180.

Strike Price

Also known as the Target Price, this is the price or value that much be attained by the underlying asset for the option to be considered as in-the-money.

Underlying Asset

This is the specific stock, commodity, index or currency.

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