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Glossary

As we have already mentioned it a few times, we, in BinaryOptionsPost.com, believe that your knowledge and deep understanding of the matter is essential to your success. Therefore we have created this A to Z vocabulary in order to shortly explain you the main terms and their definitions which are used in Binary options trading.

  • American option

    A type of option that can be exercised not only when it reaches its expiry time, but at any time, even before its expiration time.

  • Early Closure

    Type of binary options trade that allows traders to sell the options before expiry.

  • Economic Indicator

    Statistical data that indicates economic growth or decline. Usually these indicators include employment rates, Gross Domestic Product, inflation, retail sales and so on.

  • End Of Day

    The time when the trading day closes.

  • Entry rate

    The market price for an underlying asset in the moment when the option is traded.

  • Equity

    Ownership of a person, company or account.

  • European option

    A type of option that can be exercised only when it reaches its expiry time and not before that.

  • Exercise Price

    The price at which an option owner can purchase or sell the underlying stock.

  • Exotic Options

    Types of options, that weren’t commonly used by the public, but were long ago traded on exclusive markets by brokers. Binary options are a simple type of exotic options.

  • Expiry level

    The value of the underlying asset at the designated expiry time, which determines the outcome of the trade to be either in or out of the money. The same as Expiry rate and Expiry price.

  • Expiry price

    The value of the underlying asset at the designated expiry time, which determines the outcome of the trade to be either in or out of the money. The same as Expiry rate and Expiry level.

  • Expiry rate

    The value of the underlying asset at the designated expiry time, which determines the outcome of the trade to be either in or out of the money. The same as Expiry price and Expiry level.

  • Expiry time

    This the designated time or date at which a binary option will expire and the outcome of the trade will be determined to either in or out of the money. Sometimes may be seen as Time of expiration.

  • Fixed Return Options (FRO)

    Another name for binary options because of the fact that both outcomes either the profit or the loss are fixed and known by the investor prior to purchasing the option.

  • Forex

    Also known as Foreign Exchange or FX. The market in which currencies are traded is called Forex. It is an over-the-counter market which is considered one of the largest and most liquid markets in the world. It includes the currencies of all countries in the world. Traders who are interested in Forex markets should carefully consider the country’s economic and political situations.

  • Fundamental Analysis

    Fundamental analysis strategy concentrates on the macroeconomic factors which cause asset’s price movements. These could be economic, political, environmental and other relevant factors, which affect the asset supply and demand.

  • Future

    Also known as Forwards. An agreement to conduct a trade at some specific time in the future, but the price is agreed at the time of the agreement.

  • High

    A trade in which the traders presumes that the underlying asset will expire at a price higher than the strike price.

  • Historic Volatility

    Measure of actual stock price changes over a specific period of time.

  • Holder

    Everyone who has made a purchase transaction on the options market.

  • In /Out

    Type of Binary options trade where a lower and an upper boundary are defined and the target price of the asset can lie inside or outside this boundary over a specific time frame.

  • In-The-Money

    A binary options trade that ends with a profit for the trader.

  • Indices

    A group of several stock prices put together into a single number – index. They represent a a portfolio of stocks or commodities.

  • Instrument

    Another word for asset.

  • Investment Amount

    The amount of money invested in an option, stake amount.

  • IPE

    International Petroleum Exchange, London.

  • ISE

    International Securities Exchange

  • Liquid Market

    A trading environment which has high volumes of trade, slight difference between the bid and ask prices and the ability larger sized orders to be traded without a significant price changes.

  • Liquidity

    A trading environment which has high volumes of trade, slight difference between the bid and ask prices and the ability larger sized orders to be traded without a significant price changes.

  • Low

    A trade in which the traders presumes that the underlying asset will expire at a price lower than the strike price.

  • No Touch

    Types of Binary options contracts which give the trader the possibility to profit if the assets price doesn’t touch a preliminary set price level by the expiration of the contract.

  • One Touch Option

    Types of Binary options contracts which give the trader the possibility to profit if the assets price touches a preliminary set price level by the expiration of the contract.

  • Option

    A financial derivative which acts as a contract traded between two parties. This contract offers the buyer the right, but not the obligation to buy (call) or sell (put) a financial asset at an agreed-upon price, which is also called strike price, over a preset period of time.

  • Out-Of-the-Money

    A binary options trade that ends with a loss for the trader. In binary options this generally results in a loss of 75% to 100% of the initial investment.

  • Over-The-Counter

    OTC is a market where assets are traded directly between two parties without a broker’s or any other third parties mediation. Binary options are available in a limited number of exchanges but are sold as over-the-counter online products as they are not available at any market place, but via a computer terminal only.

  • Payout

    The profit realised when a purchased option expires in-the-money.

  • Put Option

    A type of option contract where a profit is realised if the price at expiry time is lower than the entry price.

  • Range Option

    Another name for In/Out or Boundary option. Type of Binary options trade where a lower and an upper boundary are defined and the target price of the asset can lie inside or outside this boundary over a specific time frame.

  • Rate

    The price of an asset.

  • Refund

    The amount that the traders get back if a trade expires out-of-the-money. The percentage is different by the different Binary options brokers.

  • Return

    The profit realised when a purchased option has expired in-the-money.

  • Stake

    The amount of money placed on the outcome of an option.

  • Stock

    A share of a company that is traded on any stock exchange or a binary options market.

  • Strike Price

    The price at which the contract option for an asset can be exercised. In Binary options trading, this term refers to the price at sale, which is used to determine whether the contract expires in or out of the money, by comparing the price of the underlying security at the time of expiration with the strike price.

  • Target price

    Another word for strike price.

  • Technical Analysis

    The technical analysis strategy is based on analyzing the past price movements of an asset in order to predict the future movements or in other words the usage of historical data, charts and graphs in order to determine the future trends in an asset price.

  • Time of Expiration

    This the designated time or date at which a binary option will expire and the outcome of the trade will be determined to either in or out of the money. Sometimes may be seen as Expiry time.

  • Touch Option

    Types of Binary options contracts where the trader determines if the asset price will touch the strike price by the expiration of the contract.

  • Trading Hours

    The time frame in which an asset is open for trading. Each asset has different trading hours, for example currencies are open for trading twenty four hours a day, while the rest of the assets are available just a few hours a day.

  • Underlying Asset

    This is the security which is traded.