Glossary

Asset

This is the underlying instrument that determines a contract. It is generally a commodity, stock, currency pair, or index to name a few.

At-the-money

This describes a neutral loss and gain. This is because the value of the asset at the expiry is roughly what it was at purchase.

Call Option

This is one of two option choices, when the investor realises a profit if the asset has a higher value at expiry than it did at purchase.

Current Price

The price in near real time as reported. It is often used to contrast real-time reporting from free price information which can be delayed by fifteen minutes or more.

Digital Options

This is an alternate name for binary options – a fixed pay-out and a fixed loss.

Expiry Price

This is the price of the asset when the contract on the asset expires. In above-below binary trading whether the option finished in the money or out of the money is based on the expiry price.

Expiry Time

The date and time when the option expires.

Exotic Options

Binary options are a simplified version of exotic options. These were traded on exclusive markets by brokers for years before they were available to the public as binary options.

Futures

This is a class of indirect securities, which is made up of a contract to either buy or sell some sort of commodity at a time in the future. A strict futures contract requires that the holder buy or sell the commodity, which a futures option gives them the choice.

Fundamental Analysis

This is one of two major schools of analysis used to examine macroeconomic data. This can include economic health, central bank decisions, political events or geological events. It believes that assets may be temporarily mispriced, but will eventually reach the correct price. By examining macroeconomic events, you can deduce what the eventual price will be.

Investment Amount

This is the amount of money invested in either a Put or Call option – the stake.

In-the-Money

This term describes when an investor realises they have a profit. If it was a call option, this would be if the expiry price is higher than the current price at the time of purchase. If it was a put option, it is if the expiry price is lower than the current price at the time of purchase.

Over-the-Counter (OTC)

These are products which are sold directly between two parties. They are distinguished from exchange trading, which occurs via exchanges and brokers set up for managing these transactions. Binary options are primarily sold as over-the-counter products; however, they are available in a limited number of exchanges.

Out-of-the-Money

This is used to describe a loss. In binary options, this tends to be a loss of 80-100% of the initial investment. If this was a Call option, it is out-of-the-money if the expiry price is lower than the current price at time of purchase. If it was a Put option, it is out-of-the-money if the expiry rice is higher than the current price was at the time of purchase.

Payout

This is the profit realised when a contract expires in-the-money. In binary options the payout tends to be between 75 and 81%.

Put Option

This is another option when the investor realises a profit if the asset has a lower value at expiry than it did at purchase.
One of two option choices, in which the investor realizes a profit if the asset has a lower value at expiry than it did at purchase.

Strike Price

This term may be used in several contexts. For the most part, it is the price at which the contract option for an asset can be exercised. In binary options, it refers to the price-at-sale of the asset, which is also the price used to determine whether a contract expires in-the-money or out-of-the-money in an above-below option. In a touch option, it refers to the value the asset much reach for the contract to be in-the-money.

Time of Expiration

This is the time and date an option contract expires.

Technical Analysis

The other major school of analysis, which is used to examine historical data to predict future trends in the asset price. Technical Analysis believes that all aspects of an asset price are built into the market price, and trends can be deduced to determine a possible direction the asset might take.