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Find out Everything Necessary About Binary Options Trading Quickly and Easily!
Learning how to trade with binary options could be a tough task for some of you. Regardless you are a beginner in trading in general, or you have never had anything to do with binaries, an education in advance can guarantee your fastest and biggest profits by all means. And if you thing that you will have to read dozens of book, spend hours in the local library or even attend specialized trading courses, we have to tranquil you at this very moment. Don’t worry at all, because becoming familiar with the binary options and learning how to trade with each of them will cost you nothing and will take few days or even hours. To make this happen and become possible, have a glance of our detailed and top-to-bottom glossary that is especially devoted to binary options trading activity! Are you ready? Well, let`s get started, then!
Glossary of Common Terms in Binary Options Trading
To make the information easier to be consumed and realized by you, we will begin our education with some common terms and basic words from the binary options trading glossary. Eventually, we will advance and in the end of the article, you will be almost ready to join the market with confidence and great hopes for great profits.
Binary or digital options, as well as nothing options, are the same terms that correspond to the something. These are trading instruments that have only two possible final outcomes. The trader can either win, or lose, which is a consequence that the name of this term hides, too. The binary options involve some fixed payouts. They are significant for the moment after the underlying stock meet or exceed its predetermined threshold. The amount of binary options payouts in general can be determined in the beginning or before you finally make your trade, but binary call options, on the other side, might have the opposite way of trading direction.
The term is always met in a binary options broker review and it is linked to your final outcome. In few words, the payout is the amount you earn from a successfully made trade, be warned that often the binary options bonus is not a part of the payout
A strike price is usually influenced by the price of the underlying security. This happens, when the certain binary option is purchased. When the expiry time comes, the price of the underlying security is compared to the strike price, so the trader can find out whether the binary option gains value (“in the money”) or loses it (“out of the money”).
Usually traders and brokers call it underlying asset. This term is linked to the type of item that a trader trades on. In few words, this is the asset in which you are purchasing an option against. The asset can be currency pair like USD/GBP, USD/EUR, commodities, indices and stocks like those from Microsoft, Apple Inc and many more.
The market price is the current underlying asset value. You need to know it in order to find out whether your trade is wining, or a loss.
The expiration is the expiry time or date, where the value of the underlying asset is compared to the strike price to your payoff. At expiration, the option becomes void or predetermining your final outcome of the certain binary options trading action.
Top Glossary Additions for Advanced Traders
Now, let`s skip to some more specific terms in binary options trading. Here, you can meet some words that will be eventually parts of your successful advanced binary options trading experience. Get your pencils or focus immediately and begin the second binary option glossary course.
With this term, we show the position in which the binary is in when it reaches the expiry time neither in-the-money nor out-of-the-money. However, this must happen at the same price at which you have purchased the option or determined the future price.
The early closure is the moment, when you receive the chance to close an option and expire it almost at once even by confronting the preliminary contract of the deal.
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You do know most types of binary options by all means. However, in case you meet the inbound option during your trading activity, be aware that this is an option on Boundary (Range) binary option activity. It is linked to the moment, when the underlying asset expires inside the higher and lower limits of the price you have determined or chosen.
You will see it any binary options trading website you appear. This amount is the amount that has been taken from your e-wallet, when you purchase an option and make a trade. Classical investment amounts vary from $1 up to $1000. Some brokers limit the value of the investment amount you can make for particular binary options.
The refund term explains a part of the full amount from your binary trading investment. It is given to you, when your option expires at-the-money. Most of today`s brokerage websites refund the traders a portion of their investment on average around 15%. However, always check out the refund amount for each broker you become a member of.
This term is linked to the best part of the entire binary options trading activity. When your trades are wining and you want t take the money back out of your trading account, you can do it only by applying for a withdrawal. In most cases and in many binary trading brokers, this process of financial transaction into your bank account and from your website account can take some time. The payment method you have chosen – debit or credit cards, bank wire transfer or some of the popular e-wallets like Moneybookers Skrill, Netteler, PayPal and etc can also determine the duration of each withdrawal processing time. Keep in mind that a withdrawal will cost you little fees, although many of the most reputable brokers allow one free withdrawal per 1 calendar month.
Probably, you will have to reach a particular level of perfection in binary trading till you get to the point of this term. However, it is our duty to explain it to you in short and simply now. In general, hedging is a purchase an asset or option with the aim of risk reduction from a certain trade in a contrarian direction in some other market place. Many of the high stake traders in binary options trading use this technique to achieve wonderful final results.
Over the Counter
We finish our binary trading glossary with the over the counter term. With it we determine the market place, in which the assets are traded directly between two parties without – aka with no broker’s interference or mediation.
Learn this glossary and become even more advanced in binary trading! With these terms you can easily get the slight idea of this trading activity without even bothering yourself with boring reading or studying for ours. Besides, we have included the most significant words that you will meet in binary option brokers by all means. So whether you are in your beginning of the education, or about to enter a website, have these glossary terms by your side and revise the terms in it once in a while – just like that in case you have forgotten or missed something from your binary learning plan! Have a great studying!
More binary trading termins and main aspects explained in separate articles:
Binary Trading Glossary – Common Used Terminology
Our binary option trading glossary is a way to learn about binary option terminology and increase your knowledge and confidence. The following glossary lists the most common binary option used.
At the money: Used when the market price of the asset is currently trading at or has closed at the exact target price.
Binary Option: A specific type of financial instrument that offers a fixed rate of return that is predetermined before the investment is made.
Boundary Instrument: A type of binary option in which the trader decides whether the market price at the time of expiry will be within a price range or outside of that set range.
Call: Used when the trader believes the market will rise for that binary option.
Demo Account: A fictitious account used to trade the virtual funds.
Digital Option: Another name for a binary option.
Early Closure: Some platforms allow a trader to close a position before the expiry time.
Expiry Level: This is the level of the asset at the time of the asset’s expiry and which the profit or loss will be based upon.
Expiry Time: The date and time at which an option expires.
High Option: A binary option type in which the trader believes the market price of an asset will expire above the current market price.
High/Low Instrument: A binary option in which a trader can decide if the asset’s market price will expire higher or lower than the current market price.
Inbound Option: One possibility of the boundary option. The trader decides if the market price will expire inside the predetermined price range.
Investment Amount: The amount of capital invested in an individual binary option.
In the Money (or ITM): This term means that the market price of the asset is currently trading at the target price or has closed and is profitable.
Long Term: This refers to long term expiry trades, trades that expire greater than 5 minutes such as daily, weekly, monthly.
Low Option: A binary option in which the trader believes the market price of an asset will expire below the current market price.
Market Price: The current price of the asset based on the providers data.
Maximum Position: The maximum investment stake per single trade for that binary option.
Minimum Deposit: The minimum investment required to activate a live binary option account.
Minimum Position: The minimum investment stake to open a trade for that binary option.
No Touch Option: A binary option trade in which the trader decides if the market price will not reach a predetermined price through the life of the option.
One Touch Instrument: A binary option trade in which the trader decides if the market price will reach a predetermined price through the life of the option.
Out of the Money: This term means that the market price of the asset is not currently trading at the target or has closed and is not profitable.
Outbound Option: One possibility of the boundary option, the trader decides if the market price will expire outside the predetermined price range.
Pairs Trading: A term used when the trader decides that one instrument will outperform another (e.g. Google will outperform Apple).
Put: Used when the trader believes the market will fall for that binary option.
Refund: This is the amount of money refunded to the trader if he/she has invested in an option that accounts for a refund if the option expires “Out of the Money”.
Return: The return is the percentage of the original investment that the trader will receive if the investment is profitable.
Short Term: This refers to short term expiry trades such as 60 seconds, 1 minute, 2 minute and 5 minute.
Strike Price: This refers to the market price of the asset as determined by the provider at the time of entry by the trader.
Target Price: Also known as the market price, is the current price of the asset as determined by the provide.
Time Remaining: The time that remains until the expiry of the binary option.
Touch Option: A Touch Option is a binary option that will expire in the money if the market price at any time during the life of the option touches a predetermined level.
Traded Amount: The amount of capital invested in an individual binary option.
Underlying Asset: The asset itself in which the trader is taking a binary option over.
Underlying Asset Types: Stocks (e.g. Apple, Google, Facebook, BP, Vodafone, Pairs Trading)
Commodities (e.g. Gold, Silver, Oil, Coffee, Sugar, Copper)
Indices (e.g. S&P 500, NASDAQ, NIKKEI 225, FTSE 100, KL Futures, Straits Times)
Currencies (e.g. EUR/USD, USD/JPY, AUD/USD)
Exotics (e.g. Bitcoin)
We hope that you found this helpful, however if you still have any questions please feel free to get in contact with us.
Know About Common Binary Option Terms through Binary Options Glossary
When you are attempting to carry out the binary options trading, you will come across many terms and phrases that you have not heard in your life before. It is very important for you to know some of the common terms and phrases used in binary options trading before stepping into the binary options trading league.
The following are some of the most common terms and phrases that will help you get started and to do well in binary options trading.
This is the price that a seller is asking for an asset or a security or is the price that an investor is willing to part from his end for the asset.
The asset is the item that you are trading on and is often referred to as the underlying asset. The examples of assets include: Commodities (Gold, Silver, Oil, etc.), Currency pairs (USD/EUR, USD/GBP, etc.), Indices (Dow Jones, S&P 500, etc.) and Stocks (Google Inc, BMW, Mercedes Benz, etc.)
At The Money
This is a unique situation in binary options trading where the purchase price of the trade ends up being the same price at the close of the trade. The trader will not encounter any gain or loss for this trade.
This term is used to describe a stock or a financial market’s price is on the decline.
The investor will be able to sell an asset or security at the bid price. This is the price at which a potential buyer is ready to buy your asset.
Binary options or digital options or all-or-nothing options give you only two outcomes, either you win or you lose and hence it is termed as binary. The trader will predict the direction of the trade for a particular asset or security and the payouts is fixed after the asset meets or exceeds the predetermined threshold price.
You should register your account with a broker before you start binary trading options. A broker will host the binary trading platforms from where you will be able to carry out your trades.
If the prices of a group of securities are rising or is expected to rise in a financial market, then it is said to be a bullish market.
Buy Me Time
This feature will permit you to add time to your opening positions as well as extend their expiration period. You will be buying time to improve your success ratio.
A trade that closes at a higher price than what it is purchased for is known as a call option.
Close means that it is the end of the trading day and it is the time for the final prices of the day to be calculated.
Commodity is a general term given to the raw materials produced by various sectors like food, metals, etc., that is used in trading. Examples are: Oil, Coffee, Silver, Gold, etc.
Currency is an asset that you use to trade. The currencies are traded in pairs like USD/GBP, USD/EUR, USD/ASD and many more.
A trader who opens single option positions or multiple option positions and ends it within the same trading day is called a day trader.
The deposit is the term given to the funds that you add to your trading account to carry with trading. The adding of the funds to your trade account is called the deposit.
Early closure is when a trader closes an option immediately before it gets expired and before a contract ceases.
The Expiration Time is the time at which an option expires. The option that is expired is void and cannot be traded. The expiry times of binary options can be: 1, 15, 30 and 45 minutes or an hour, 24 hours or weekly.
This means that the profit amount never changes, even if the asset value changes.
One of the basic ways to evaluate stocks is the fundamental analysis. This analysis is on the basis of the current political and economic data. An asset is analyzed by taking a look into various factors that could affect its price like weather, global economic conditions, financial policy, etc.
Hedging is a risk management strategy that is employed to offset or limit the loss probability from the variations in the prices of currencies, commodities or securities. It involves taking equal and opposite positions in two different markets to reduce the loss.
The index represents a broad portion of a particular market. It can also be focused on any particular industry. Its examples are: Dow Jones, Japanese Nikkei, American Nasdaq, French CAC, British FTSE, etc.
It is the amount that a trader puts from his pocket to buy an option.
In The Money
In the Money is a term used in binary trading when the purchased option by a trader turns profitable from the trader. If you make a high (call) option and the option’s price go beyond the target price during expiration, then the option is known as in-the-money option. This term is often used to describe a winning trade.
Last Trading Day
The last trading day is the last day where you will be able to open or close a trade in a market. It has got nothing to do with the expiry date in trading.
This is a term used when the underlying asset expires outside the set lower and higher price limits of the target prices.
Out of the Money
If the strike price of a call option is greater than the market price for an underlying option after its expiration, then it is known as the out of the money option. This term normally means a loss for the trader as he or she makes no gain with the trading.
The financial profit or return that you get when a contract expires is known as the payout.
This is the place where the brokers of binary trading allow traders to execute their trades. There are several types of major platforms and most of them perform in a similar fashion, yet each one has its own unique feature.
You can opt for binary put options if you believe that the value of the item that you are trading with will decrease in price before the expiration time of the option. If the strike price decreases during that time period, you stand to win money based on the percentage set before you started bidding.
If your option expires at-the-money, you will get a portion or the full amount that you have invested as a refund. If the option expires out-of-money option, then the broker might even refund you a portion of your investment in the binary trading and that would be around 15%.
This is a price level beyond which the security or the market price will not rise.
Return is the money that you will be making after the expiry of an option. The return will depend on the item that you are trading with as well as the brokers. The return value will be mentioned to you before you make a purchase so that you will always know whether you can make a gain or stand to lose through the binary trading. For example: if you invest $100 and the return for it is 25%, then you will gain $125 after the expiration of the option.
This is the place where shares and stocks and other securities are sold and bought.
This is a term given to the asset of a particular company that is available for trade in the financial stock market. Examples: Vodafone, Barclays, Google Inc, Apple Inc, Facebook, etc.
The strike price of an underlying asset is the price at which the call or the put option is exercised. One of the key decisions that a trader needs to do is to pick the strike price. The strike price has a good control over the option trade.
This is a helping tool that will allow you to check out the other trader’s position directions and you can even mimic the behavior of the other trader to your advantage.
This is the range between the lowest and the highest prices where the actual stock is traded.
This is an asset that forms the basis of an option and they include indices, stocks, currency pairs and commodities. The underlying assets are not limited to the above mentioned asset types.
The rapid changes and the huge fluctuations that the financial market sees is called volatility.
Binary trading options is not just about making investments, it also involves withdrawal or getting the money out of your trading account. The withdrawal from your trading account can happen at any time and largely depends on the broker, the method opted for withdrawing money and also the cost.
Have we left out any binary options terms from this glossary or the definition is wrong? Let us know via the contact form and we will add some new terminology if need be.
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