Binary Options Terminology

Best Binary Options Brokers: 2020 Ranking
  • Binarium
    Binarium

    Best Choice! The leader in our ranking!
    Perfect for beginners!
    Free Demo Acc + Free Trading Education!

  • Binomo
    Binomo

    Good choice for experienced traders!

Terminology

You will learn about the following concepts

  • Basic binary options terms
  • What is asset and current rate
  • Call and put options
  • In and out of the money

In this article you will find some of the most frequently used terms and we will provide you with their explanation. Understanding them is necessary because you will be using them on a daily basis during your trading career.

Naturally, if you start trading without having the necessary core knowledge, you are very likely to fail and wipe your initial capital. The main terms that we are about to mention below are: asset, binary option, broker, current rate, expiration rate, range option, in the money, high or call option, low or put option, subjacent asset, out of the money, rate of profit.

Best Forex Brokers for Russian Federation

Asset – this is the underlying stock, commodity, currency pair or index, on which the binary option is based.

Binary option –this term contains excessive information that cant be explained in just a few words. Basically, the binary option can be explained as way of online investment for a fixed return with an expiration period, which is also fixed. It has gained huge popularity in the last couple of years mainly because its simplicity and appeal toward the general public.

Broker – brokerage companies allow users to trade binary options on the markets. It would be impossible to make a deal, if there werent any brokers.

Current rate – it represents the current price of the asset.

Range option – the term is also referred to as ‘’zone option’’ and it is the limit that companies usually specify for different zones, for example.

Expiration time – the date and time when the option is about to expire.

High or Call Option – this is the most used type of binary option. It speculates that the assets price will rise.

Low or Put Option – the opposite of a High of Call option. It is purchased when the trader thinks that the assets price will decrease.

In-the-money – this term is used in order to describe the situation when you have predicted the movement of the asset price correctly and the binary option is profitable.

Best Binary Options Brokers: 2020 Ranking
  • Binarium
    Binarium

    Best Choice! The leader in our ranking!
    Perfect for beginners!
    Free Demo Acc + Free Trading Education!

  • Binomo
    Binomo

    Good choice for experienced traders!

Out-of-the-money – this term describes the situation when you have wrongfully predicted the assets price movement, rendering the binary option a loser.

Rate of profit – this term represents the percentage of money that the trader gets as return after a trade expires in the money.

Fundamental analysis – this is one of the topics that will be extensively covered in the next parts of the tutorial, but for now all you need to know is that the fundamental analysis represents a way to evaluate a stock, currency or commoditys fluctuations based on such political, geopolitical, demographic, macroeconomic factors and others.

Technical analysis – another topic that will be thoroughly covered later. It is an analysis methodology that uses primarily chart patterns to help you predict the direction an asset might move. Generally it ignores fundamental factors and is based mainly on historical price data and volume.

Binary Options The Basic Terminology 2020 April Updated

Every financial market has its accompanying lingo. Words and phrases you will only see used in the context of that specific market. In Forex trading, there are pips and spreads and in Binary Options, there is “In the money” and “Out the money”.

The following are some explanations about the primary terminology used to describe the Binary Options market.

Binary Options: The basic explanation is that like the meaning of the word “Binary”, with Binary Options, there are only two possible outcomes. You were either correct in your prediction and you therefore make profit, or you were incorrect, in which case you lose your money. How much do you make or lose from Binary Options? Well, that depends on your initial investment, but there is no issue of experiencing huge unexpected losses or making astronomical profits.
Call Option: When a trader predicts that the instrument will increase in price. Even if the price then increases by a tenth of a cent, you profit from such a Binary Option.
Put Option: When a trader predicts that the instrument will decrease in price. Even if the instrument then decreases by a tenth of a cent, you profit from such a Binary Option.
In the Money: If you “win” the trade, it is referred to as “In the Money”. For example, if you placed a Call Option, and the price increased, you are then “In the Money” in that Binary Option. On the flip side, if you placed a Put Option and the price decreased, you are also “In the Money”.
Out the Money: If you “lose” the trade, it is referred to as “Out the Money”. For example, if you placed a Call Option, that the price decreased, you are then “Out the Money” in Binary Options. On the flip side, if you placed a “Put Option” and the price increased, you are also “Out the Money”.
At the Money: If the price of the instrument is identical at the expiry date to the amount that it was at the trading time. In this scenario, you were neither right nor wrong, in which case, your investment is returned to you in full with Binary Options.
Expiry Date: The time or date at which the Binary Options expire and the price is examined to see if you are In the Money or Out the Money.

In conclusion, at first glance, some of the Binary Options lingo can seem confusing and overwhelming, but after a little reading, it all clears up and becomes understandable.

Binary Options Glossary

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!

Review

Review

Review

Asset

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.

Current price

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.

In the money

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.

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.

Payout

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.

Boundary instrument

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!

Bear market

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.

Bull market

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

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

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.

Currency Price

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.

Deposit

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.

Early closure

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.

Index binary

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.

Investment amount

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.

Refund

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.

Return

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.

Stock

A type of asset, this is the financial share of a company – for instance Microsoft, Samsung, Twitter – and etc which you trade with.

Withdrawal

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.

Charting

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.

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!

Best Binary Options Brokers: 2020 Ranking
  • Binarium
    Binarium

    Best Choice! The leader in our ranking!
    Perfect for beginners!
    Free Demo Acc + Free Trading Education!

  • Binomo
    Binomo

    Good choice for experienced traders!

Like this post? Please share to your friends:
Binary Options Trading Education
Leave a Reply

;-) :| :x :twisted: :smile: :shock: :sad: :roll: :razz: :oops: :o :mrgreen: :lol: :idea: :grin: :evil: :cry: :cool: :arrow: :???: :?: :!:

Broker Early Expire Average Return Min Deposit Min Trade Rating More
90% $ 10 $ 1 ★★★★★
95% $ 10 $ 1 ★★★★★
× 95% $ 250 $ 1 ★★★★★
× 85% $ 10 $ 1 ★★★