Binary Options Glossary Of Terms
Alex

LEVEL 10 : SENIOR

REVIEWS 9 | REPLIES 84

#1443

Alex

August 25, 2015 at 12:42 pm

A glossary, or glossary of terms for binary options, is also known as a vocabulary or dictionary in laymen’s terms  . It is an alphabetical list of specific terms in a particular industry, explaining the definitions and meanings of those terms to help better understand them. The binary options industry is no different, also containing it’s own terms to describe certain things.

Glossary Of Terms (alphabetical order)

Asset/Underlying Asset

  • Asset, or commonly referred to as the Underlying Asset. This refers to the type of Asset that you are trading on. Stocks (e.g. Google, Yahoo, Microsoft) Commodities (e.g. Gold, Brent Crude) Indices (e.g. NASDAQ, FTSE 100) Currencies (e.g. EUR/USD)

Asset Class

  • An Asset Class is a category of Commodity, Stock or Index etc. Within each class there will be different available Assets to trade.

At-The-Money (ATM)

  • This refers to the position in which the option is in when it expires. The outcome is neither In-The-Money (ITM) nor Out-The-Money (OTM) and thus a tie.The Strike Price is equivalent to the Expiry Price.

Asset Value

  • The Asset Value is the current price an Underlying Asset is trading at.

Bearish/Bear Market

  • The term Bearish is used to describe an overall declining price in a market.

Binary Option

  • A Binary Option allows traders to earn a Fixed Profit if the value of an Underlying Asset reaches either Above (Call/High/Up) or Below (Putt/Low/Down) a set Strike Price in a predetermined amount of time.

Bullish/Bull Market

  • The term Bullish used to describe an overall rising price in a market.

Call Option

  • If the trader feels the value of the Underlying Asset will increase before the predetermined Expiry Time.

Current Price

  • The current price is the price of a given Asset right now.

Early Closure

  • If a trader chooses an early closure, it means they are able to close an open position immediately.

Expiry Price

  • The expiry price is the price of the Underlying Asset when the option expires.

Expiry Time

  • The expiry time is a preset date and time when a Binary Option expires.

Fundamental Analysis

  • Traders use Fundamental Analysis as one of their most important tools. Also knows as trading based on news, it involves comparing a wide variety of macroeconomic data from decisions made by central banks and governments. The analysis of this kind of date helps traders determine whether the value of assets is heading up or down.

High Option

  • A High Option is an option in which the trader predicts the Underlying Asset will rise in price higher than the target price before expiry.

Investment Amount

  • This is the amount of money invested by the trader open a given trade.

In-The-Money (ITM)

  • In-The-Money refers to the position in which the option is in when it expires. This term is used to describe when an investor achieves a profit.

Instrument

  • An instrument is another term used for an Asset.

Low Option

  • A Low Option is an option in which the trader predicts the Underlying Asset will fall in price lower than the target price before expiry.

Out-The-Money

  • Out-The-Money refers to the position in which the option is in when it expires. This term is used to describe when an investor loses money.

Payout

  • The payout is the profit made when an option expires In-The-Money.

Pip

  • A Pip is the 4th digit in a currency pair price quote (0.0001). The only exception being the Yen pairs where a pip is the 2nd digit (0.01).

Pipette

  • A Pipette is a fraction of a Pip. In currency pairs it is the 5th digit (0.00001). The Yen exception being the 3rd digit (0.001).

Put Option

  • If the trader feels the value of the Underlying Asset will decrease before the predetermined Expiry Time.

Return On Investment (ROI)

  • This is the profit ratio a trader has made on an investment. ROI can be calculated in % (75%), currency ($75) or odds (1.75:1).

Strike Price

  • The Strike Price is the price at which a Binary Option Asset was purchased at.

Technical Analysis

  • Technical analysis involves studying market prices, past price, chart patterns, volume and market activity in general.

Please feel free to add to our Glossary Of Terms!

Dewey Colon

LEVEL 2 : NOVICE

REVIEWS 7 | REPLIES 4

#1549

forexpipit

August 27, 2015 at 10:41 am

Very Good article indeed, my friend! These basic information are normally overlooked by newbie traders. All they think of is making money and nothing else. This is a recipe for disaster…

 

Roger Flores

LEVEL 2 : NOVICE

REVIEWS 8 | REPLIES 4

#1602

Roger

August 27, 2015 at 9:59 pm

Good thinking adding this. Wish I would have searched for something like this when I first started binary options. Learned the hard way…

I don’t think there is anything to really add to this Glossary Of terms. Basically everything you need to know to start off with.

Cheers
Roger

Nickolas Witt

LEVEL 2 : NOVICE

REVIEWS 7 | REPLIES 4

#1612

tradingmachine

August 28, 2015 at 10:29 am

Hey Alex, I have 2 terms to add:

Supply and Demand – Demand refers to how much (quantity) of a product is desired by buyers. Supply refers to how much the market can offer at a certain price.

Price Action – price action is a trading technique that allows a trader to read the market and make subjective trading decisions based on the recent and actual price movements, rather than relying solely on technical indicators.

Wayne Torres

LEVEL 2 : NOVICE

REVIEWS 6 | REPLIES 6

#1614

Newbie101

August 28, 2015 at 10:42 am

Hehe I have one.

Newbie trader – This is a person that is new to the trading game. He/She does not know much of what is going on. The degree of uncertainty in trading can sometimes be overwhelming and push him/her to make mistakes. They tend to ask a lot of questions.

It is the reason why I chose my username (Newbie101). So, guys please forgive me if I ask any stupid questions. I am just trying to learn.

 

Earl Nelson

LEVEL 2 : NOVICE

REVIEWS 8 | REPLIES 6

#1616

kingmoney

August 28, 2015 at 10:48 am

Hi Wayne,

there is nothing like a stupid question in trading. You could be helping other traders by asking questions that they are not sure of. We are here to help eachother. One of these days you won’t be a newbie anymore and then you would also want to pass on your knowledge to the new traders.

So please don’t be scared, ask away!

Alex

LEVEL 10 : SENIOR

REVIEWS 9 | REPLIES 84

#1619

Alex

August 28, 2015 at 11:31 am

Hi Nickolas & Wayne,

Thank you for adding terms to the Glossary! I am sure there are plenty more terms that people will be adding to the list, which is good.

I have a saying I would like to add: “I am in the money honey!” LOL Something we say when we win a trade/expired In-The-Money.

Once again thanks for the contribution guys!

Happy Trading,
Alex

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