Binary Options Terms And Meanings
Our glossary is the most straightforward 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.
A Binary Option is a type of trading where the gain is predetermined. It’s referred to as "in the money" when a prediction is correct at the end of the expiry period, If the prediction doesn't come true, it’s referred to as "out of the money". The word "binary" refers to there being a choice of only two outcomes.
A Boundary Instrument is a tool used to predict whether an assets price will be within predetermined limits by the time the expiry period comes to an end.
Refers to a facility to close an existing trade before the end of the expiry time. Early Closure is allowed by some brokers with the price of a reduced return.
The time and date at which a current trade where an option will come to an end is the Expiry Time. The whole transaction becomes void at that instance.
This term refers to the actual value of an underlying asset at the moment the expiry time of the option in trade expires.
When on a High/Low prevailing trade, you can buy an option on the condition that the price of the underlying asset will expire above the strike price.
High/Low Instrument 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.
Also known as the Range Instrument, it refers to a tool in where a trader will predict that an assets price will be between a range of two values at the end of the expiry period.
Investment Amount 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 forecast does not come true.
In The Money
In The Money 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 relates to a losing trade.
Low Option 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.
Refers to the current or actual price of an asset in real-time. Market Price is the price without accounting for delays by data providers.
No Touch Option
No Touch Option is a trading style where the trader predicts whether an assets price will hit or fail to reach a predetermined level. The trade wins if the prediction comes true.
One Touch Option
One-Touch Option is another option where the trader sets a barrier which has to be struck or surpassed by an assets price within a fixed expiry period. The moment that barrier gets hit or exceeded the trade matures 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 assets price does not materialise.
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 is the money the trader gets 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 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’s 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.
Sometimes 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".
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’s is hit or not hit depending on the option, at whatever stage of the expiry period, the trade expires instantly.
Underlying Asset is the asset type represented in a specific trade, e.g. currency, commodity, stock or index. It could also apply to a future if it is the object of trade at that particular time.
Underlying Asset Types
Refers to all the assets which are available to trade. They could be currencies, stocks, commodities, indices or futures.
Jacob has been an author for Binary Options Expert since our launch in 2012. He has over forty years’ experience in the financial sector and has held a variety of positions within financial services corporations and venture capitalist organisations. Learn more.