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Binary Options Glossary
The world of Binary Options can be overwhelming and confusing, especially if you’re just starting out. Here are a list of the most commonly used terms and their meanings. Taking the time to study and learn these terms will lessen your learning curve and make you a better overall trader.
Current Price: The latest price of the option according to data in real time.
Expiry Price: This is the price of the asset at the option’s expiry time.
The expiry price will determine if the option expired out-of-the-money or in-the-money.
Expiry Time: This is the date and time that an option expires.
In-the-money: This depends on whether you have what’s called Call Option or Put Option.
Call Option in-the-money is determined if the option’s purchase price is lower than the Expiry Price at the time of Expiry. Put Option in-the-money is determined if the option’s purchase price is higher than the Expired Price at the time of Expiry.
Out-of-the-money: Again, this depends on whether you have a Call option or Put option.
Call Option out-of-the-money means that the option’s purchase price is higher than the Expiry level at the time of Expiry. Put Option out-of-the-money means that the option’s purchase price is lower than the Expiry Level at the time of Expiry.
At-the-money: When the option’s buying price is comparable to the Expiry level then the entire amount of the investment is returned to the trader/investor.
Payout: The amount of money that an investor receives when the asset has expired ‘in-the-money.’ This is normally in the range of 65-81% when binary options are traded.
Investment Amount: The total amount that has been invested in a specific binary option.
Asset: An asset can be defined as a commodity, a stock, an index, or a FOREX pair.
Call Option: A type of option that gives the trader a fixed amount of return when the asset is higher on the maturity date than the amount that it was purchased at. (Think buy low, sell high.)
Put Option: A type of option that gives the trader a fixed amount of return when the asset is lower on the maturity date than the amount it was originally purchased at. (The trader expects the price to drop.)