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Important Binary Options Terms to Remember

It’s highly essential for you to get familiarized with several terminologies and expressions before you start trading binary options. Fortunately, these terminologies are very easy to learn and remember. Knowing these terms can help you understand everything that you might encounter in any trading platform.

60 second option – these are Call/Put options than have an expiration time of 60 seconds.

Asset – the underlying instrument used in determining a contract.

At the money – when the option’s strike price is equal to the market price. The option neither gains nor loses value.

Binary options – a type of option where the payoff is either the fixed amount of an asset or nothing at all.

Boundary options – also known as Range or In/Out options, this is a type of binary option wherein you have to guess if the underlying asset’s price will be inside or outside the boundary price set by two target prices.

Call option – an option contract where you as a trader is predicting that the price of an underlying asset will be higher at expiry time than its price when you purchased the option.

Call/Put options – also known as High/Low or Up/Down options, this is the most common type of binary option wherein you have to guess if the underlying asset’s price will be higher or lower at expiry time than its price when you purchased the option.

Commodity – a type of asset for raw materials coming from a various economic sectors such as metals, energy or food.

Currency pair – the relative value of one currency against another currency. The first currency in the pair is called the base currency while the second is called the quote currency.

Day trade – a trade that opens and closes within the same day.

Downtrend – a state where the asset’s price rate is decreasing.

Early closure – also known as Sell, the ability exit out of an option before it reaches expiration.

Expiration – the time and date at which the option expires and the outcome of a trade is determined.

Graph – the graphic representation of the price movement of a specific asset.

In the money – the term describes the result of a binary options trade that is showing a profit.

Indices – a type of asset which represents the average value of the stock price of different corporations.

Investment – the amount that is invested in a specific option.

Out of the money – the term describes the result of a binary options trade that is showing a loss.

Payout –the profit in percentage amount that you will receive after the option expires.

Pip – the minimum value by which a Forex quote can move.

Put option – an option contract where you as a trader is predicting that the price of an underlying asset will be lower at expiry time than it was when you purchased the option.

Risk – the possible financial loss from making an investment.

Rollover – also known as Extend, this allows you to prolong the expiration date of an option for the purpose of increasing its chance to expire in-the-money.

Stock – a type of asset which is the share of ownership of a particular company or corporation.

Strike price – the price of an underlying asset at the time when you purchased the option

Target price – is the price that the underlying asset needs to surpass in order for the trade to expire in-the-money.

Touch option – this is a type of binary option wherein you have to guess if the underlying asset’s price will touch or reach a specific target price.

Uptrend – a state where the asset’s price rate is increasing.
 

 

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