Binary Options Terms and Meanings

Trading Glossary

Our glossary is the simplest path to learning binary options terminology and definitions, giving you the tips and tricks needed to guide you on the road to knowing what you're doing when trading online.

At The Money

Refers to a situation in trading where at expiry, the strike price equals the current price. Here, there is no profit or loss for the trader.

Binary Option

This is a type of trading where the gain is predetermined. When a prediction comes true at the end of the expiry period, it is said that you are “in the money”. If the prediction doesn’t come true, it is termed as “out of the money”. The word “binary” refers to there being a choice of only two outcomes.

Boundary Instrument

This is a tool used to make a prediction on whether an asset’s price will be within predetermined limits by the time the expiry period comes to an end.

Early Closure

Refers to a facility to close an existing trade before the end of the expiry time. This is allowed by some brokers with the price of a reduced return.

Expiry Time

This is the time and date at which instance a current trade where an option has already been staked will come to an end. The whole transaction becomes void at that instance.

Expiry Level

This term refers to the actual value of an underlying asset at the moment the expiry time with which the option in a trade had been bought expires.

High Option

When on a High/Low prevailing trade, an option can be bought on the condition that the price of the underlying asset will expire above the strike price.

High/Low Instrument

This is an instrument used with the call/put options where the High is a prediction that the price will be above the strike price and a Low is a prediction that it will end up being below the strike price.

Inbound Option

Also known as the Range Instrument, it refers to a tool in where a trader will make a prediction that an asset’s price will be between a range of two values at the end of the expiry period.

Investment Amount

This refers to the total sum of money put at stake for an individual stake. It is the investment amount a trader wins in case of a correct prediction or loses if the prediction does not come true.

In The Money

This refers to a winning trade where a predetermined payout is paid to the trader automatically at the end of the set expiry period. Out of the Money refers to a losing trade.

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Low Option

This is the opposite option from the High Option where a trader will speculate that the price of an asset will be lower than the strike price at the end of the expiry period.

Market Price

Refers to the current or actual price of an asset in real-time. This is the price without accounting for delays by data providers.

No Touch Option

This is a trading style where the trader makes a prediction as whether an asset’s price will hit or fail to reach a predetermined level. The trade wins if the prediction comes true.

One Touch Option

This is another option where the trader sets a barrier which has to be struck or surpassed by an asset’s price within a set expiry period. The trade matures the moment that barrier is hit or surpassed whether the expiry time has come to an end or not.

Out of The Money

A situation where a trader loses all the money he had invested in a trade and his speculation on the price movement of an asset’s price does not materialize.

Robot

Robot software is essentially a software program that trades for you. You still need to train it and set the parameters that it will operate within but once you have mastered that you can effectively set the program to run on autopilot and spend your time monitoring the markets and other tasks.

Refund

This is the money the trader will be refunded if the trade expires with a correct prediction. Each broker has his rate; some will refund the full amount while others will refund a set percentage of the investment amount.

Return

This is the profit that a trader will make over and above the investment amount when his prediction in binary option comes through. The return rate is the percentage of the invested amount and it is predetermined before the trade is executed. For example, if your investment amount on a trade is $100 and the broker’s Payout is at 80%, when you are “In the Money”, the broker will pay you $180 which represents the $100 invested amount and the profit of $80 which is your 80% return.

Target Price

It is also referred to as the strike price. It is the price an asset must hit within a predetermined expiry period for a trader to be “In the Money”.

Touch Option

Refers to the instruments where the trader predicts whether an assets price will hit or not hit a predetermined barrier within the expiry period. If the barrier is hit or not hit depending on the option, at whatever stage of the of the expiry period, the trade expires instantly.

Underlying Asset

Refers to the asset type; currency, commodity, stock or index that is represented in a specific trade. It could also refer to a future if it is the object of trade at that particular time.

Underlying Asset Types

Refers to all the assets which can be traded. They could be currencies, stocks, commodities, indices or futures.

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