Binary options glossary

Analysis

Analysis exists in two forms: technical and fundamental, and is the process of reviewing and examining the past performance as well as up-to-date news that are relevant to an asset before deciding on a contract purchase.

Binary options

Asset

Major asset includes stocks, currency pairs, commodities and indices. Binary options traders will be able to find some underlying assets within each of those major assets.

At the Money (ATM)

A circumstance when at the end of the expiry time, the asset price remained unchanged from the time the contract was purchased, which leads to the refund of the original investment to the binary options trader.

Binary Options

People trade this financial instrument on the basis of the change in asset price. Traders are able to profit either when their asset value increases or decrease, because the stake in the asset is not purchased. Trading binary options, also called digital options, has been getting very popular in the past few years.

Binary Options Trading

Includes two steps: predict and purchase a contract based on that prediction, traders also need to choose an expiry time for the purchased contract. Trading on a platform is facilitated by a broker, who will also be in charge of paying profits to winning traders.

Binary Options Broker

Companies who provide traders with an online trading platform to carry out their trades. Binary options broker also some extra features like trading tools and educational tools that help new traders to learn the basic. One trader can partner with one or more brokers.

Current Price

The price of an asset at the current time, which should be provided from a dependable financial data source like Bloomberg or Reuters. Brokers will show this price on the platform, and traders ought to take into consideration this factor before investing.

Demo Account

A kind of temporary account that is used to learn about binary options trading or assessing the broker platform. Demo accounts are, usually, offered free of charge by most brokers; and are either provided for a determined period of time, or will expire after the fictional account funds have been used.

Expiry Date and Time

This parameter defines the day and time that the binary options contract will expire. It can be picked by traders for each trade based on the expiry options provided by the broker. Different trade types have different levels of expiry date and time.

Call

A contract that is purchased because the trader predicts that the price of an asset will increase within a specific period of time.

In the Money (ITM)

A circumstance when the trader gains profit. This will not normally be determined until the end of the trade, when the contract expires. In some trading types, however, the trade can end in the money even before the expiration.

Out of the Money (OTM)

A circumstance when the trader loses the investment amount of a trade because his prediction turns out to be incorrect at the end of the expiry time period.

Payout Percentage

If the trade is in the money, the trader will be awarded an amount that is a percentage of his investment amount. This is called the ‘payout percentage’, which varies among brokers as well as trade types.

Put

A contract that is purchased because the trader predicts that the price of an asset will decrease within a specific period of time.

Strategy

Traders usually use strategies in trading to reduce risk and increase the chance of getting a profit. It is a plan of action in trading binary options; include strategies for specific assets, trading time periods, trade types, etc.

Strike Price

The price at which a trader purchases a contract. When the expiration time comes, the contract will be determined whether it is in the money or out of the money based on this strike price, the traders’ prediction and the type of contract purchased.

Trading Tools

Trading tools, which are normally included within the broker platform, help traders analyze the asset before deciding on the type of contract to purchase. They can include charts, graphs, etc.