23 September 2017
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Glossary

Glossary


Before you start trading binary options, it is of great importance for you to familiarize yourself with the terms used in binary options trading. Knowing what these financial trading terms mean will help you to understand what your trading platform has to offer. Having a good understanding of important terms can help to make you learn to trade binary options faster and with lesser chances to make bad decisions. Here are the most important binary options terms that you need to know and understand.

Asset Class

This refers to the type of assets used in binary options trading. These are i)foreign currency, ii)stocks, iii)commodities such as crude oil and gold, and iv)indeces

At-the-money

This refers to a state in which the price of the preferred asset remains the same at expiration time. In this case, the trader’s investment is returned in full.

“Call” (Up) Option

It is an option that a trader uses when he or she believes that the price of the underlying asset is higher at expiration time than it was at the time the option was purchased.

Close Now

This is a binary trading feature that allows a trader to cancel a digital option prior to the time of expiration. A trader may opt to use this when he is convinced that his option is not showing the potential to perform as he expected. This usually happens when his preferred asset does not move towards the direction he predicted.

Current Price

This is the latest price reflected in real-time data unless it is otherwise noted.

Digital Options

This is another term given to binary options. It actually refers to binary options that have preset payouts and losses.

Expiry Price

This is the price of the underlying asset at expiration time. It is the determining factor whether the option expired in-the-money or out-of-the-money.

Expiry Time

This is the time and date at which a binary option expires.

Fixed Amount

This is the specific amount a trader wants to invest at the beginning of each trade. The trader actually controls how much he can potentially earn or lose.

Forecast of Movement

This refers to the trader’s prediction of the movement of the underlying asset. A trade is successful if the trader makes a correct prediction which way the price of the underlying asset will go at expiration time. A correct prediction earns 75% - 95% return.

Fundamental Analysis

This is a type of analysis traders use to assess the effects of economic and other factors on the value or price of an option. These factors include actions made by central banks or major economic and political news.

In-the-money

This refers to the result of a binary options trade that is successful.

Out-of-the-money

This happens when the binary options trading is not successful, meaning, the prediction of made by the trader was not correct.

“Put” (Below) Option

It is an option a trader uses if he thinks that the price of the underlying asset at expiration time is lower than its price at the time of purchase.

Return on Investment (ROI)

In the binary options market, is the amount a trader receives if his prediction is successful or in-the-money. It is worth noting that the higher a trader invests, the higher his potential ROI goes. Binary options gives the trader complete control of his/her investment. It is actually up to the trader how much he can risk to lose or aim to gain based on his analysis and prediction of the direction the price of the underlying asset goes.

Strike Price

This is the price that an underlying asset should be in order for an option to be in-the money or out-of-the-money.

Technical Analysis

This is a type of analysis that uses charts, statistics, and records of past performances of an underlying asset. This is a method that a trader can use to be able to predict the movement of an asset.

Underlying Asset

This refers to the specific stock, foreign currency, commodity or index the trader may choose for trading binary options.