Glossary and Binary Option Trading Terminology

Our binary option trading glossary is a way to learn about binary option terminology and increase your knowledge and confidence. The following glossary lists the most common binary option used.

At the money: Used when the market price of the asset is currently trading at or has closed at the exact target price.

Binary Option: A specific type of financial instrument that offers a fixed rate of return that is predetermined before the investment is made.

Boundary Instrument: A type of binary option in which the trader decides whether the market price at the time of expiry will be within a price range or outside of that set range.

Call: Used when the trader believes the market will rise for that binary option.

Demo Account: A fictitious account used to trade the virtual funds.

Digital Option: Another name for a binary option.

Early Closure: Some platforms allow a trader to close a position before the expiry time.

Expiry Level: This is the level of the asset at the time of the asset’s expiry and which the profit or loss will be based upon.

Expiry Time: The date and time at which an option expires.

High Option: A binary option type in which the trader believes the market price of an asset will expire above the current market price.

High/Low Instrument: A binary option in which a trader can decide if the asset’s market price will expire higher or lower than the current market price.

Inbound Option: One possibility of the boundary option. The trader decides if the market price will expire inside the predetermined price range.

Investment Amount: The amount of capital invested in an individual binary option.

In the Money (or ITM): This term means that the market price of the asset is currently trading at the target price or has closed and is profitable.

Long Term: This refers to long term expiry trades, trades that expire greater than 5 minutes such as daily, weekly, monthly.

Low Option: A binary option in which the trader believes the market price of an asset will expire below the current market price.

Market Price: The current price of the asset based on the providers data.

Maximum Position: The maximum investment stake per single trade for that binary option.

Minimum Deposit: The minimum investment required to activate a live binary option account.

Minimum Position: The minimum investment stake to open a trade for that binary option.

No Touch Option: A binary option trade in which the trader decides if the market price will not reach a predetermined price through the life of the option.

One Touch Instrument: A binary option trade in which the trader decides if the market price will reach a predetermined price through the life of the option.

Out of the Money: This term means that the market price of the asset is not currently trading at the target or has closed and is not profitable.

Outbound Option: One possibility of the boundary option, the trader decides if the market price will expire outside the predetermined price range.

Pairs Trading: A term used when the trader decides that one instrument will outperform another (e.g. Google will outperform Apple).

Put: Used when the trader believes the market will fall for that binary option.

Refund: This is the amount of money refunded to the trader if he/she has invested in an option that accounts for a refund if the option expires “Out of the Money”.

Return: The return is the percentage of the original investment that the trader will receive if the investment is profitable.

Short Term: This refers to short term expiry trades such as 60 seconds, 1 minute, 2 minute and 5 minute.

Strike Price: This refers to the market price of the asset as determined by the provider at the time of entry by the trader.

Target Price: Also known as the market price, is the current price of the asset as determined by the provide.

Time Remaining: The time that remains until the expiry of the binary option.

Touch Option: A Touch Option is a binary option that will expire in the money if the market price at any time during the life of the option touches a predetermined level.

Traded Amount: The amount of capital invested in an individual binary option.

Underlying Asset: The asset itself in which the trader is taking a binary option over.

Underlying Asset Types:  Stocks (e.g. Apple, Google, Facebook, BP, Vodafone, Pairs Trading)

Commodities (e.g. Gold, Silver, Oil, Coffee, Sugar, Copper)

Indices (e.g. S&P 500, NASDAQ, NIKKEI 225, FTSE 100, KL Futures, Straits Times)

Currencies (e.g. EUR/USD, USD/JPY, AUD/USD)

Exotics (e.g. Bitcoin)

We hope that you found this helpful, however if you still have any questions please feel free to get in contact with us.