Binary options glossary
|American Option:||This is an option that can be invoked anytime during its life. The majority of exchange-traded options are American.|
|Ask:||This is the price at which an underlying asset of a binary option can be purchased.|
|Assets:||Binary options are based on underlying assets, which can be stocks, commodities, indexes or Forex currency pairs.|
|Asset class:||This is a specific group of investments, e.g. stocks, forex, commodities and indices.|
|At-the-money:||If the price of a binary option at its expiry time is exactly the same as its opening or strike value, then investors will receive full refunds of their entire initial deposits.|
|Bear:||This is a trader who anticipates that market prices will fall.|
This is a binary options strategy which is used when a trader is bearish on the underlying asset.
When a ‘call’ binary option is executed then it is termed a bear call spread. Similarly, a “put’ option is termed a bear put spread.
|Bid:||This is the price at which an underlying asset of a binary option can be sold.|
|Binary options:||Binary options are also known as fixed return and digital options. They can be used to trade underlying assets and they payout pre-determined profits and losses that are known by all parties before the contracts are exercised.|
|Bond:||This is a certificate of a debt that is normally distributed by a government or large corporation.|
|Breakeven price:||This is the value that price has to achieve in order that the trader can start to realize a profit.|
|Bull:||This is a trader who anticipates that market prices will rise.|
This is a binary options strategy which is used when a trader is bullish on the underlying asset.
When a ‘call’ binary option is executed then it is termed a bull call spread. Similarly, a “put’ option is termed a bull put spread.
The butterfly spread is a limited profit and risk binary option strategy that is a combination of both bull and bear spreads.
The butterfly spread is centered on 3 striking prices and can be constructed using calls or puts.
|Call option:||This binary option will generate a pre-determined profit for you if the price of its underlying asset is higher at its expiry time than its opening or strike price.|
|Correlation:||This is a statistical measure indicating to what degree the movement of two different currency pairs is related.|
|Current Price:||The last reported real-time price of the binary option’s underlying asset unless otherwise stated.|
|CDO:||Collateralized debt obligations are a form of organized asset-backed securities (ABS) whose values and payments are derived from a portfolio of fixed-income underlying assets.|
|Commodities:||This asset type includes goods and services that satisfy human needs and wants such as energy, food and metals.|
|Credit Default Swap:||A swap contract involves buyers executing a series of premium payments to the seller in exchange for a refund should the asset go into default.|
|are forms of paper money used as an easy medium of exchange between buyers and sellers.|
|Currency Option:||presents a trader with the right (but not obligation) to buy or sell a predetermined quantity of a particular currency at a specified exchange rate.|
|Currency Trading:||The act of buying and selling global currencies. Currency trading is used by banks and other financial institutions to support international trade. Individual investors can also speculate on currency trading using Forex.|
|Euro:||The Euro is the authorized currency of the Eurozone and is the world’s second largest reserve currency.|
|European option:||This is a binary option that can only be exercised on its expiry date.|
|Exotic Option:||This is a derivative possessing attributes making it usually more complex than other commonly traded products such vanilla options.|
|Expiry Price:||The real-time price of the binary options underlying asset quoted at the selected time of expiry. The value is used to determine if the binary option expired in-the-money or out-of-the-money.|
|Expiry Time:||The chose time and date at which a binary option lifetime will expire.|
|Financial Transactions:||These are events when contracts between buyers and sellers are executed in order to exchange assets for payment usually resulting in a change in the financial status of the parties involved.|
|Forex:||Forex is the most liquid and biggest financial market in the world which is used to exchange and trade currencies by large fiscal institutions, businesses, governments, banks, currency speculators, other institutions and individuals.|
|Forex Option:||These binary options use underlying assets based on the currency pairs traded on Forex, e.g. EURUSD and GBPUSD.|
|Futures:||These are standardized contracts between buyers and seller to exchange selected assets of predetermined quantity and quality for prices agreed today (the strike or futures prices) with delivery to occur at mutually agreed future dates.|
|Hedging:||This is a trading technique that uses new trades to offset and reduce the risk exposure of existing ones from market fluctuations.|
|Indices:||are selections of stocks that have been grouped according to a certain criteria.|
|Interest rates:||These rates represent the cost of borrowing money and are normally quoted as annual percentage rates.|
A ‘call’ binary option will be in-the-money if its price records a higher value at its expiry time than that of its opening or strike one.
A ‘put’ binary Option will be in-the-money if its price records a lower value at its expiry time than that of its opening or strike one.
|Intrinsic value:||This value is the difference between the opening and the present price of an underlying asset.|
|Instrument / underlying asset:||This is a security used to construct a binary option using one of the following asset types: Forex, Stocks, Commodities and Indices.|
|Investment:||This is the amount of equity used to speculate on the financial markets with the intent to make profits.|
|Investment Amount:||This is value of the deposit an investor makes to fund a binary option.|
|Liquidity:||This is the parameter used to assess the ease in which an asset can be converted into cash during the current market conditions.|
|Loan:||This is the amount of money that a borrower receives from a lender.|
|Long:||This term refers to when a trader BUYS an asset.|
|Lot:||This is the smallest unit of an asset that a trader can purchase.|
|Margin Account:||This is an account provide by brokers to their clients providing them with the cash to purchase securities or assets.|
|Mid-Market:||This value is the real market price of an asset. The price is calculated as the average of its bid and ask price.|
|NASDAQ:||The NASDAQ Stock Market is the largest electronic screen-based equity securities trading market in the United States and fourth largest by market capitalization in the world.|
|One-Touch Option:||Provides investors with predetermined fixed payouts once the price of the underlying asset is touched or excessed a preselected value. If this condition is not achieved before the expiry time elapses, then a loss is recorded.|
A ‘call’ binary option will be out of-the-money if its price records a lower value at its expiry time than that of its opening or strike one.
A ‘put’ binary Option will be in-the-money when its price records a higher value at its expiry time than that of its opening or strike one.
|Payout:||This is the profit that investors will receive if binary options expire ‘in-the-money’. OptionRally’s payouts are as high as 78% of the initial deposit.|
|Pip:||This is the smallest tradable unit of currency pairs.|
|Put option:||This binary option will generate a pre-determined profit for you if the price of its underlying asset is lower at its expiry time than its opening or strike price.|
|Quotation:||The highest price that a buyer is willing to pay for an asset and the lowest price that a seller is willing to accept. Quotations provide investors with the current price for all traded assets.|
|Rate of return:||This trading parameter measures an investment's profitability.|
Reuters Group Limited is a UK-based Canadian company.
Reuters provides information about the international financial markets to newspapers, broadcasters, internet media and investors worldwide.
Reuters’s main focus is to supply the financial markets with market data, news information and trading products.
|RTS Index:||The RTSI is an index composed of 50 Russian stocks which are traded on the Russian Trading System Stock Exchange of Moscow.|
|Security:||A security is a negotiable instrument of financial value. Securities are roughly characterized into debt securities, e.g. banknotes, bonds and debentures; equity securities, e.g. common stocks and derivative contracts, e.g. forwards, futures, options and swaps.|
|Share Price:||The price of particular share or stock.|
|Shares:||A company listed on the Stock Market can divide its worth into units of equal value which are termed shares. They can then be marketed for sale in order to raise cash. As individual who purchased shares in a company is titled a shareholder and becomes one of the owners of that company|
|Short:||This term refers to when a trader SELLS an asset.|
|Short Straddle:||This is a neutral binary options strategy that involves the simultaneous selling of a put and a call using the same underlying asset, striking prices and expiration dates.|
|Spread:||This is the difference between the Ask and Bid prices of the underlying asset upon which a binary option is based.|
|Stock Exchange:||This is the market place where the shares of listed companies are sold and bought.|
|Stock Market Analyst:||This is a professional expert who is able to proficiently assess the value of company listed on the Stock Exchange by analyzing factors such as its financial records, assets, market share, its products and other relevant data.|
|Stock Option:||This is a binary option that uses an underlying asset based on the shares of a company listed on the Stock Markets.|
|Stocks:||The capital stock (or stock) of a company is the initial capital introduced into or invested in the business by its founders.|
|Strip Strategy:||Strips are unlimited profit and risk binary options strategies that are used when traders believe that price of the underlying asset is more likely to collapse downwards as opposed to surging upwards as a result of increasing volatility.|
|Swap:||This term defines an exchange of payments over a pre-determined period of time according to specified terms. The normal form used is the interest rate swap, in which one party agrees to pay a fixed interest rate in return for receiving an adjustable rate from another party.|
|Trading hours:||Each asset has its own trading hours, trading days and holidays.|
|Vanilla Option:||A category of options which includes those with the most standard components such as expiration dates and strike.|
|Volatility:||This is a measure of the price fluctuation of a binary option’s underlying asset.|
|Yield:||This is a measure of the annual return on an investment and is quoted as a percentage.|