Binary Options Glossary

Account Denomination?

Binary options brokers give you the ability to have your account in Dollars, Pounds, Euros or Turkish Lira.

Asset

An asset is the forex, stock, index or commodity that the binary option is based on.

At-the-money

A binary option is at-the-money when the option expires at the same level it was purchased, which results in the full investment sum being returned to the investor.

Binary Option

A binary option is an option in which the return level is known at the outset of the opening of the contract. Return levels vary with different brokers for the following outcomes: in-the-money or out-of-the-money.

Boundary Option

Boundary options are options based on lower and upper boundaries (2 prices). Your payout is determined by you either being in or out of the boundary range at the expiry time of the option.

Call Option

This option is purchased with the intention that it will expire above the level it was purchased. This would make the option in-the-money. The option is out-of-the-money if it expires below the price of purchase.

Expiry Time

This is chosen by the trader, and is the date and time where a binary option expires at.

Fundamental Analysis

Traders use fundamental analysis to try to forecast which direction a binary option will expire.

In-the-money

A Call option is in-the-money if the option expires higher than the price it was purchased. A Put option is in-the-money if the option expires below the price it was purchased. In both cases you receive your predetermined profits.

Investment Amount

The funds a trader invests in the chosen binary option.

One Touch Option

A One Touch option is an option in which the trader receives their desired payout when the option surpasses a predestined target price before the expiry time. In the event that the target price is not reached, the full invest amount is lost.

Out-of-the-money

A trade is out-of-the-money with a Call option if the option expires below the price it was purchased at. A trade is out-of-the-money with a Put option if the option expires higher than the price it was purchased at.

Payouts

Payouts often vary between 60-90% from broker to broker. When an option is in-the-money a trader receives this payout plus the original investment funds.

Put Option

A Put option is purchased with the belief that it will expire below the current level at the expiry time. A correct forecast would result in the trade bring in-the-money. However, the trade is out-of-the-money if it expires higher than the purchasing price.

Strike Price

The strike price is the price level that you purchase the binary option.

Technical Analysis

Technical analysis is used to forecast future price movements of binary options. Methods include using graphs and charts based on price history.

Underlying Asset

The option a trader purchases is based on an underlying asset. This can either be a currency pair, index, commodity or stock.