Binary Option Glossary

Asset: This is the underlying financial instrument at the heart of the trade. In order to win the trade, the binary options trader must determine the direction of the asset. Assets are generally categorized into commodities, stocks, currency pairs and indices.

 

Call option: This is one of the two option choices, referring to the upwards trade. If a trader believes that the value of the underlying asset will be higher at the time of expiry, then he should purchase a call option.

 

Put option: This is one of the two option choices, referring to the downwards trade. If a trader believes that the value of the underlying asset will be lower at the time of expiry, then he should purchase a put option.

 

At-the-money: If the strike price is equal to the expiry price of the asset, the trade ends at-the-money. The amount of the investment is returned into the trader’s account and no money is lost or made.

 

In-the-money: If the trader opens a call option and the expiry price is higher than the strike price of the asset, or if the trader opens a put option and the expiry price is lower than the strike price, the trade ends in-the-money. The amount of the investment is returned into the trader’s accounts along with the predetermined payout.

 

Out-of-the-money: If the trader opens a put option and the expiry price is higher than the strike price of the asset, or if the trader opens a call option and the expiry price is lower than the strike price, the trade ends out-of-the-money. Most or the entire investment amount is deducted from the trader’s account.

 

Bearish: This adjective refers to a downwards market attitude. A bearish trader believes that the market will decline in price. A bearish market is one which is in decline.

 

Bullish: This adjective refers to an upwards market attitude. A bullish trader believes that the market will rise in price. A bullish market is one which is on the rise.

 

Time of Expiration: The time and date an option contract expires; expiry time.

 

Expiry price: The expiry price is the price of the asset when the contract expires. In binary trading, an option is determined as either in-the-money or out-of-the-money based on whether this expiry price is higher or lower than the strike priced of the underlying asset.

 

Fundamental analysis: This is one of the key ways of analyzing market trends in order to predict future asset prices. Financial analysts review companies by examining sales, earnings, products or services, and review a country’s economy by accounting for factors like GDP, interest rates, construction and employment.

 

Technical analysis: This is one of the key ways of analyzing market trends in order to predict future asset prices. Technical analysis uses charts and graphs to plot past market action. It examines past market data including the prices themselves, trading volume, and asset trends.

 

Investment amount: This is the amount of money used to purchase the binary options contract. The trader is always in control of how much to invest in any single trade. Payouts are shown as percentages of the investment amount, so the more invested in any trade, the higher the potential rewards, but also the higher the potential loss.

 

Payout: The payout is the profit realized when the contract expires in the money. The payout will usually be between 70%–90% payout. It is immediately visible in the investor’s trading account.

 

Pip: This stands for ‘percentage in point’ which is generally the fourth decimal place, i.e. 0.0001. Asset values are displayed on the platform to this degree of accuracy. A pip was traditionally the smallest amount by which a Forex rate could move, although with modern advances this is no longer the case.

 

Resistance: A term used in technical analysis to describe the price level at which bullish, rising, asset prices are expected to stop and reverse direction.

 

Support: A term used in technical analysis to describe the price level at which bearish, falling, asset prices are expected to stop and reverse direction.

 

Strike price: In binary options, this refers to the price of the underlying asset at the very start of the trade.

Disclaimer: Trading Binary Options is highly speculative. It involves a high level of risk and may lead to loss of invested capital. Therefore, we highly recommend you not to invest more than you can afford to lose. Before investing, you should thoroughly analyse and evaluate your financial situation, as well as the level of your experience. Bpari is the Online Trading Platform Provider. The quotes featured on Bpari platform may be different from the real-time stock quotes. There are certain risks linked to the exploitation of the online trading platform, including mechanical errors, software failures, technical and connectivity issues. The company does not retain responsibility for any service outages or delays you might face as a result of trading online. The news, researches, analysis and any other data contained on this website is provided as trading comments, and, therefore, cannot be considered as an investment advice. The company does not retain responsibility for any losses or damage you might face as a result of using the data hosted on this site.