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Binary Options Glossary

An asset- with regard to binary options is the option that is being traded and whose price in the real market determines whether the trade expires in the money or otherwise.

At the money- refers to a condition in binary options trading, in which the strike price of an option is determined to be equal to or almost equal to the exact market price of the underlying security.

Binary options / Digital options- are trading options whose payout is often pre-determined. In digital options, the payout is often fixed after the underlying asset has exceeded the threshold or the strike price.

A bid- is a price at which an individual or a broker is willing to purchase a particular security or option.

A broker- is an individual who facilitates trading in the binary options market, often at a fee.

A call option- refers to an opportunity to purchase particular assets at an agreed price on or before a certain date. It is a financial contract that gives the buyer the right to purchase a particular security or option before a certain date.

A commodity- is a useful thing, merchandise or product that can be traded for its value.

The current price- refers to a valuation of a commodity, security or option that is based on the most recent market trend and not the base year. It is the selling price of a product as determined by the current market forces.

Deposit- refers to an amount of money that is set aside, often in account for the purposes of trading in binary options. Traders in binary options are often required to deposit some money in their accounts before they can set off trading in the market.

Early closure- refers to a situation in which the trade is terminated before the agreed time frame elapses. In binary option trading, early closure helps the trader lock in some amount or reduce the amount of loss.

Expiry price- refers to the official price at which a particular trade expires on the expiry date. This price is often referred to as make up or settlement price.

The expiry time- refers to a specific date or time when the trade on a particular option is expected to come to an end. Most of the time, any option provides the traders with hourly, daily, weekly and monthly expiry times.

Forex- refers to a worldwide decentralized exchange market over which currencies are traded. The forex market is one of the largest and most liquid markets having over $1.9 trillion traded in a day.

Fundamental analysis- refers to a method through which an individual evaluates a security. This process involves an attempt to measure the intrinsic value by looking at the economic, financial and qualitative aspects of the business.

Hedging/Fencing- is a strategy that is normally used in an effort to reduce the risk of an investment. It is a position that is taken with the intention to offset losses or gains that may be incurred by another investment.

Index / Indices- refer to the measures of changes in value that a group of assets may undergo.

Initial investment- is the name of the upfront cash and total value of resources that is required to start up an investment portfolio. In the binary options, the initial investment is the money a trader puts forward to start off his account.

The investment amount- is the amount of money that is used to buy up the binary options market. This refers to the money that was put at stake for a put or call option.

In the money- is a term that is used to refer to a situation in which the option’s strike price falls below the current market price of the underlying assets in put options. For the call options, it is a situation in which the strike price is above the market price of the underlying asset.

The market price- is the value of an asset as determined by the forces of the market.

Out of the money- is a term used to refer to a put option whose strike price is much higher than that of the market price of the underlying asset. With regard to the call option, it refers to a call option whose strike price is lower than the market price of the underlying asset.

A payout- is the amount of money that an individual is entitled to if the trade expires in the money. In binary option trading, the payout amount is often pre-determined.

Put option- refers to a financial contract that allows a person to sell an asset on or before a particular date. This contract gives the owner of the asset the right and not the obligation to sell the asset before the specified date.

A refund- is the amount of money that is paid back to a trader, often one who has made a loss in the market as a way of easing the pinch of the loss.

Return- refers to the expected profit that a person will get from a particular binary options trade.

Rollover- is a term that is used to define a situation in which funds from a mature security are re-invested as a new issue or a similar issue. Often, rolling over an investment incurs a particular charge.

Stock- refers to the merchandise that is kept on a business premise for the purposes of trade. A stock option may also refer to a privilege that is sold to another party giving him part of the ownership of an investment.

A Stop Loss- order refers to an order that is lodged with a broker allowing him or her to sell off a particular security as soon as it reaches a particular price. Often, the stop loss order is designed to reduce the amount of loss an investor may incur.

A strike price- is the price at which a trader can exercise a put or call option. The price is often fixed after the seller receives all the bids for a particular security.

Target price- is the price at which an individual seller is willing to sell off or offload a particular stock. It is the projected price that a trader may have based on current market trends.

Technical analysis- refers to the analysis of the past price changes in the hope of forecasting future changes in the price of such a security.

Time of Expiration (Expiry)- refers to a specific time after which an option is no longer considered valid. This time offers a more specific deadline to an option contract and it keeps changing over time.

A trader- is a person who engages in a particular business transaction in the binary option market.

A trend- is a general direction in which something, in this case the price of the underlying assets or options, is moving.

Underlying assets- refer to the security, property or loan agreements that an option provides to the option holder, giving him the right to buy or sell. It is the financial instrument on which a particular derivative price is based.

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