Binary option. Binary options are financial instruments in which the payoff is structured to be either a fixed amount of compensation if the option expires in the money or nothing at all if the option expires out of the money, and traders make predictions on the price movements of underlying assets after a predetermined period of time.
A trader is buying an option with the underlying asset of EUR/USD currency pare. Current market value of the option is 1.2487, and the expiration of the option will occur in 15 minutes. The trader is choosing Call option, predicting that the price of the option will rise above 1.2487 by the time of expiration. The trader will profit up to 90% of the invested amount if the price of the underlying asset will be above 1.1.2487 in 15 minutes. If the price will be below this level, the trader will suffer a loss.
In-the-Money. This term is used to describe an option that yields financial profits. When the option expires in the money it means that your prediction was correct, and you will receive predetermined return.
Out-of-the-Money. This term is used to describe an option that doesn’t bring any profit and results in the loss of the invested amount.
At-the-Money. This is a term used to describe situation when the option's strike price and its market price at the moment of expiry are identical. If the option expires at-the-money, your initial investment is refunded to your account balance.
Asset. Binary trading assets are currency pairs, commodities, indexes or stocks. All binary contracts are based on these four classes of assets. Each one of these four classes includes multiple individual assets.
Call options. A call option is a binary options trading contract that generates profit if the price of the asset increases by the time the contract expires.
Put options. A put option is a binary options trading contract that generates profit if the price of the asset decreases by the time the contract expires.
Expiry time. The expiry time is the specific date and time the option contract closes. It ranges from 30 seconds to several weeks.
Currency pair. A currency pair is a type of asset that can be traded as a binary option. Currencies are always traded in pairs like, USD/JPY, GBP/USD or EUR/USD.
Commodity. A commodity is a type of asset that can be traded as a binary option. Specifically, commodities are raw materials like gold or oil, and agriculture products like wheat and gold.
Indices. An index is a type of asset that can be traded as a binary option. An index includes multiple stocks such as Dow Jones, NASDAQ and FTSE 100.
Stock. Stock is a type of security that that can be traded as a binary option. It represents ownership in a corporation’s assets and earnings. For example Apple, Microsoft, Sony.
Strike price. The strike price is the price of the asset when it is purchased. It determines whether a trade finishes out of the money or in the money at expiry.
Return. The return is the amount you will receive when your trade finishes in the money. For instance, if you invest $100 and the trade finishes in the money with an 85% payout then you will receive a $185 return.
Investment amount. It is the amount of money invested in one option.
Market price. The market price is the quoted asset price that is used to represent the current value of a particular asset.
Technical analysis. Technical analysis in binary options trading is the study of the charts and historical data to in order to predict future trends and patterns of an asset behavior.
Fundamental analysis. Fundamental analysis in binary trading is the method of study when traders analyze market news and sentiment to predict the future value of an asset.
Volatility. Volatility is the measurement of how much an asset changes in value over a given period of time. The more the value changes, the higher is volatility. If an asset has a high volatility, there is more risk associated with trading it, but greater potential for profits. If an asset has a low volatility, there is a lower risk trading it, but less profit potential.