Trading with binary options, as you probably know, requires you to be a real pro in all of the terms and basic rules of this activity. For this purpose it is strongly recommended that you become aware of those words with important meaning which you will encounter during your trading activity. Be aware that most binary options brokers provide some glossary packs too, but in most cases this pack of terms is usually quite limited. We are about to disclose to you everything that you really need to know, so if you are motivated and focused enough, let`s get started with the quick and effective education course now!
Common Glossary For Binary Options Trading – Basics
Let`s begin with some of the most common terms from the binary options trading glossary. After all, proper and gradual learning is the most optimal course. Besides, by studying the glossary step by step, it will be easier for you remember the most significant words from the binary options glossary!
The asset is the underlying tool or instrument that is chosen for binary options trading contract determinations. Assets can include stocks, indices, commodities and the different currency pairs you trade with.
At the money
With this term, we talk about the instant in time, in which the targeted value of a binary option becomes the same as the price of the underlying asset selected by the trader.
The current price is the value (the amount) that is determined in almost real time and it is the opposition of the most price information that is in many cases delayed by a particular period of time – about 15 minutes.
Time of expiration
Usually known as expiry time, with this term we point to the date or the time, when the value of the underlying asset will be compared to the strike price in order to form the final outcome or your payoff. At the expiry time (time of expiration) the binary option you traded then becomes void and ceases to be traded.
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If a binary option is in the money, then it has value upon the expiry time. Usually, a put binary option is in the “in the money” status when the underlying security price is below the strike price. Alternatively, a binary call option becomes “in the money”, when the underlying security price goes above the strike price.
Speaking of strike price above, let`s figure it out what this term means. The strike price, in a few words, is determined by the underlying security price at the very moment when the binary option is purchased and the contract is made. Once the binary option reaches its expiry time, the underlying security price must be compared to the strike price in order to see if the binary option has won, or lost its value, or in other words whether it is in the money or out of the money.
The payout is the value of money that you as a trader receives as a profit from binary options trading activity as to a particular binary trade.
This is a kind of a tool that is applied by the traders in order to make the prediction about the underlying asset value – and to be more specific, whether this value will expire during or out of the set of ranges – simpler and quicker.
Glossary Terms for Advanced – Learn the Following, too!
Even though a little bit more specific, the following terms from our glossary are also important to be learnt, known and applied during your binary options trading activity. We divide our specially tailored glossary in two parts in order to simplify it for you, and to offer you a quick pause during your learning process. But let`s not lose any more time, and begin with the next portion of significant binary options additions in our fantastic and helpful glossary!
This is where the market (that is usually referring to a financial or stock market), prices are almost in all cases in a downward trend.
This is where the market (that is usually referring to a financial or stock market) prices are almost in all cases in an upward trend.
Commodities are the types of assets that you can purchase a binary option to trade in. In general, the commodity is a physical object and it can be a precious metal – gold, silver and etc – as well as a manufacturing resource like cotton or even petrol. The price of each of the commodities we have chosen (and the rest of them) is determined according to many economic factors and changes.
Currency is another asset that you can trade with. Note that currencies usually come in pairs, and the most common among them – USD/GBP, EUR/CAD and etc – may be found in almost any binary options broker.
The currency price is the other name of the market price term. This is the present value of the underlying asset and it is always announced in real time – i.e. with no delays by the financial information provider.
The deposit is the amount of money you invest with a binary options broker, when you complete a registration and create an account. This is the total value you put into the brokerage e-wallet of yours to make trades with.
The early closure is the moment when the traders receive the possibility to close a binary option which then, instantly causes it to expire, ceasing the contract.
With the glossary term index binary we describe the binary option which has underlying an asset that is measured to an index. Such binaries can be understood by these examples: Dow Jones, FTSE-100 and etc.
When you purchase binary option to trade it, you pay a particular value and this is the investment amount. These amounts – prices – vary according to the binary option, the market, as well as the broker you are signed with – from $1 to $1000.
Popular in trading experience in general, this glossary term refers to the entire (or a part of) amount of your investment you have returned to you in a situation when the binary option expires at the money.
The return amount is the amount that you earn right after the purchased binary option expires in the money. The return value ranges according to the instrument you have traded with your binary. The particular asset you have chosen, as well as the broker type you are trading on, also affect for the return value. Since the return value is always pre-determined, you know in advance the eventual loss or profit you will get from the purchased binary.
A type of asset, this is the financial share of a company – for instance Microsoft, Samsung, Twitter – and etc which you trade with.
When you reach a moment that you have earned a fair sum of money from your binary options trading activity, then, you will want to have this money withdrawn from your brokerage account and deposited in your your debit card or bank account. To receive this money, you will have to make a withdrawal. Note that the withdrawal methods and terms and conditions are different between brokers, and depend on the broker you are trading in with binaries.
With charting you practice plotting a binary option value at some very beneficial moment of time. Charting in general is a tool and it is a way of trading with binaries. The main purpose of charting is to be helpful with technical analysis.
And since we have mentioned it, let`s explain the technical analysis term, too. This is the analysis – and the usage of it – when you want to undertake research in advance and to find out additional data points in order to make your prediction of the prices and the market movements of the assets you have chosen more optimal and profitable.
Feel free to start your learning course with our helpful and very useful binary options trading glossary now! We are sure that it will be very supportive to your overall education in the field, so do not lose any more time and start learning right away! Good luck!
Binary Options Brokers – Glossary
Binary Options Brokers – Glossary of terms before trading with your broker
Here is a list of the most common trading terms used in the world of Binary Options and Forex Trading. While we don’t expect you to know every single one of them without stumbling right off the bat however, we do recommend giving this hand glossary a once over before reading any further.
It isn’t that we doubt your level of intelligence, but the world of finance, investment banking, and Forex Trading can be a little volatile. The market won’t wait for you to learn your terms, nor should it. This is serious business, and even if you don’t get good at trading Binary Options, well, at least you can sound like you know what you’re talking about.
Asset An asset is the object of value of which you will be trading. This is more commonly known as stocks, commodities, etc.
At-The-Money If an option’s Expiry Price is similar/identical to its original buying price, it is referred to as being At-The-Money. In this case, instead of making a profit or losing it all, traders will actually just receive the entirety of their original investment back. Essentially breaking even.
Binary Options The exciting, risky method of Forex Trading in which one either makes a predetermined amount, or makes nothing at all.
Call Option This option provides a trader(s) with a concrete, predetermined profit so long as the underlying asset’s value is higher by its Expiry Time than it was at the moment of purchase. Most common form of Binary Option.
Current Price Self-explanatory. This is the most recent value of an asset according to the most up-to-date data available.
Digital Options Essentially just another name for Binary Options, once again playing off of the binary aspect of the trade.
Expiry Time This is the lifespan of an option, or, more accurately, the last moment of its life. If an option has not reached the desired result by this time and date, it never will (as far as the current trade/option is concerned).
Fundamental Analysis Very In-depth analysis in which every potential outside force is considered, and also determined as to how it/they may/will affect the value of an option.
In-The-Money This is the ultimate goal every trader has for his/her option. When something is considered to be In-The-Money, it means that an option has reached (or exceeded) the desired Strike Price by its Expiry Time.
Out-of-The-Money The not-as-desired outcome for an option. This refers to when an option’s value fails to reach the Strike Price by its Expiry Time.
Put Option An option that favors Out-Of-The-Money results. Traders succeed when the underlying asset price is lower by its Expiry Time than the price at which it was originally purchased.
Range Option A Range Option requires that traders predict whether or not an asset’s value will fall in or out of a particular, pre decided range come an option’s Expiry Time.
Strike Price The target price. The goal. The price at which an asset must reach by its Expiry date, which determines whether an option ends in or out-of-the-money.
Technical Analysis Speculative Analysis, mostly. Analysts look at an asset’s past trends in order to predict its further behaviors.
Touch Option Very similar to a Call Option, a Touch Option asks that traders predict whether or not an asset will “touch” a predetermined Strike Price, only it must do so before its Expiry Time.
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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