Binary Options Glossary

A
Ask Price
This is the price at which a trader can buy an asset in the financial markets, The ask price is also a part of the formula which is used to calculate the expiry level of an asset. That is, did the asset price move above or below the ask price at the expiry of the trade.
Asset
This is the underlying instrument used to determine a contract and it is usually a stock, commodity, currency pair or Forex, or an index, Full details of the assets we offer can be found on the Asset Index.
Asset Class
In binary options trading, this refers to the types of assets you can trade in such as stocks, currency pairs or Forex, indices and commodities.
At-the-money
When the option expiry price is the same as the buying price.
B
Bear
A bear refers to a trader who acts on the belief that an asset or the market is falling or is expected to fall.
Bear Market
A bear market refers to a declining or decreasing market over a prolonged period of time usually caused by a weak economy and subsequent decreased corporate profits.
Bid Price
The bid price is the price at which a trader can sell an asset in the financial markets, The bid price is a part of the formula which is used to calculate the expiry level of an asset.
Binary Options
Also known as Digital Options, All-or-Nothing Options or Fixed Return Options (FRO’s), It is a contract or an option where only two outcomes are possible, That is, either you win a set amount of money or you lose a set amount of money,There is nothing in between.
Binary Options Trading
Binary options trading involves the prediction of the price direction a stock, commodity, index, or foreign currency will take by a designated expiry time, That is, will the strike price of the asset move Up or will it move Down at the expiry of the trade.
Boundary or Range Platform
This instrument allows a trader to decide whether the value of the underlying asset will be inside or outside a specified range at the time of the expiry of the trade, The range is demarcated by lower and higher target price limits.
Breakout
This refers to the rise in the price of an underlying instrument above its resistance level or a drop below the support level.
Bull
A bull refers to a trader who believes that a market is rising or is expected to rise.
Bull Market
A bear market refers to an increasing or a rising market over a prolonged period of time usually caused by a strong economy and subsequent increased corporate profits.
C
Call Option
When a trader has chosen the upward direction for an asset price by expiry, That is, Call Options gain when the underlying asset price is trading at more than the strike price at the expiry of the trade.
Change
This refers to the difference between the current price and the price of the previous day of an asset.
Close
This refers to the price of the last transaction for a particular asset each day.
Commodities
Commodities are one of the assets you can trade in binary options and it is a general name that is given to raw materials from a variety of sectors such as energy, food and metals, For example, gold, oil, sugar, platinum, View the ‘Asset Index’ to get more information on the commodities.
Current Price
The price of an asset as reported in ‘real time’ without any delay, The Options Maker data is obtained using ‘real-time’ data reporting which means there is no delay.
D
Day Trading
Day trading is an approach to trading in which the same position or trade is entered and exited within one day.
Double Up Feature
The Double Up feature on the trading interface enables a trader to create a duplicate trade of an existing trade, The only element that will differ will be the strike price but a new trade will be created with the same asset, the same expiry time and the same investment amount, This feature is often used when a trade shows the probability of ending in-the-money.
Dow Jones Industrial Average (DJIA)
This is used as an overall indicator of market performance, The Dow Jones Industrial Average is composed of 30 blue chip stocks which are traded daily on the New York Stock Exchange.
E
Early Closure or Sell
The ability to close an open position so that the option will expire immediately, A trader can use the ‘Sell’ feature on the trading interface in order to end a trade before the predetermined expiry time.
End of Day
The close of the trading day when market prices settle.
Exchange Rate
The price at which one country’s currency can be converted into another country’s currency, For example, the Euro versus the US Dollar.
Exotic Options
Exotic options are a type of option that was traded on exclusive markets for years, This was then opened to the public in 2008 in a simplified form as binary options.
Expiry Price
The price of the underlying asset at the time of expiry according to the real-time market price,The expiry price determines whether the option has expired in-the-money or out-of-the-money.
Expiry Time
The designated time and date at which an option expires.
Extend Feature or Rollover
The Rollover or Extend Feature on the trading interface enables traders to extend the expiration date of an option or trade so that they can give an option a greater chance to expire in-the-money, For example, if a trader purchased a one hour Call option and five minutes before the time of expiration the price of the underlying asset has still not increased as predicted, for a one-time fee the trader could extend the time of expiration to give the option the opportunity to end in-the-money.
F
Fixed Amount
This refers to the specific amount that a trader wants to invest at the start of each trade, Naturally, the larger the investment, the larger the potential payout, Since the returns are fixed in binary options trading, the trader can always control how much he/she risks losing from an option or how much he/she can potentially earn. Fluctuation A variation in the market price of an asset. Forecast of Price Movement A successful trade or option occurs when the trader accurately predicts or forecasts in which direction the price of an asset will move before the trade expires, That is, the trader will purchase a CALL option if he/she believes that the asset price will close higher or a PUT option if he/she believes that the price will decrease by the expiry of the trade. Fundamental Analysis Fundamental analysis is one of two major schools of economic analysis, That is, fundamental and technical market analysis, Fundamental analysis is used to examine macroeconomic data such as national economic health, central bank policies, and political or geologic events, This form of market analysis believes that assets may be mispriced temporarily (over or under), but that it will eventually reach their correct price, By examining macroeconomic events and doing fundamental analysis, traders can use this information to deduce the correct eventual price of an asset.
G
Gap
A day in which the daily range of an asset is completely above or below the previous day’s daily range.
H
Hedge
Hedging refers to reducing the risk of loss by taking a position through options which is opposite to the current position being held in the market, That is, a trader will purchase both a Call and a Put option on the same asset and expiry time.
High
High refers to a trade or an option in which the trader presumes that the underlying asset will expire at a price that is higher than the target price.
High and Low
High and Low refers to the high and low transaction prices of an asset that occur each trading day.
High or Low Platform
The high or low platform refers to a trade or an option that gives the trader a predetermined fixed payout if an underlying asset expires at a price that is higher or lower than it was at the start of the trade, provided that the selected option or trade expired in-the-money.
I
In-the-money
A trader’s option is in-the-money when his prediction on the direction (regardless if it was above or below) was correct, Options expire in-the-money, and the trader receives the full payout even if the trader was correct by a single pip.
Indices
Indices are one of the assets you can trade in binary options and an Index represents a basket of stocks, For example, Dow Jones, Nasdaq, S&P 500, View the ‘Asset Index’ to get more information on the indices.
Investment
The amount invested in a specific option.
L
Liquidity
The ease with which an asset can be converted to cash in the marketplace, A large number of buyers and sellers and a high volume of trading activity provide high liquidity.
Low
This refers to a trade or an option in which the trader presumes or predicts that the underlying asset will expire at a price that is lower than the target price.
M
Market Price
The Market Price is the quoted price that represents the current value of an underlying asset based on a feed provided by Data Provider such as Reuters.
Mid Market
Mid Market is the average of the bid and ask prices and this price represents the real price of the market with no spreads between bid and ask.
N
NASDAQ
NASDAQ = National Association of Securities Dealers Automated Quotations System, This is a computerized system providing brokers and dealers with price quotations for securities traded over-the-counter as well as for many New York Stock Exchange listed securities.
Net Profit
The overall profit of a trade.
No Touch
This refers to a trade or an option in which an asset price does not reach or surpass its target level.
O
One Touch Option
The One Touch option is a trade option which gives the trader a predetermined fixed payout if the price of the underlying asset reaches, ‘touches’ or surpasses a predetermined level or a target rate, To be eligible for this payout, it is sufficient that the option touches or surpasses the predetermined level just once throughout the option’s life cycle, If the predicted level is not reached or surpassed even once, the initial investment is lost.
Option
A security that represents the right, but not the obligation, to buy or sell a specified amount of an underlying asset at a specified price within a specified time.
Options Maker Rates
Options Maker enables traders to buy or sell an asset with no market spread, That is, the open rate for a Put option is therefore equal to the open rate of a Call option.
Out-of-the-money
A binary option is out-of-the-money when the trader’s prediction was incorrect regarding the direction of the price by expiry time, The trader will then receive 10% of his investment amount.
P
Payout
The percentage amount that the trader will receive at option expiry.
Put Option
When the trader has chosen a downward direction for the asset price, That is, Put Options gain value when the underlying asset is trading at less than the strike price at the expiry of the trade.
R
Refund
The amount that is refunded to the trader if an option expires ‘at the money’, In the case of trades that end out-of-the-money, traders are also be refunded up to 10% of their initial trade investment.
Relative Strength Index (RSI)
An indicator used to identify price tops and bottoms.
Resistance
A price level that the market has a hard time breaking through to the upside.
Return or Payout Percentage
The amount returned or paid out to the trader if an option or a trade expires “in the money”, For example, if a trader invests $100 with an 87% payout, the return will be $187.
Reuters
The Reuters System is one of the world’s leading financial data providers and it is also the system which Options Maker takes its expiry rates from.
Reward-Risk Ratio
The mathematical relationship between the maximum potential reward and maximum potential risk of a trade.
Risk
The potential financial loss inherent in the investment.
Rollover or Extend Feature
The Rollover or Extend Feature on the trading interface enables traders to extend the expiration date of an option or trade so that they can give an option a greater chance to expire in-the-money, For example, if a trader purchased a one hour Call option and five minutes before the time of expiration the price of the underlying asset has still not increased as predicted, for a one-time fee the trader could extend the time of expiration to give the option the opportunity to end in-the-money.
S
Sell or Early Closure
The ability to close an open position so that the option will expire immediately, A trader can use the ‘Sell’ feature on the trading interface in order to end a trade before the predetermined expiry time.
Stock Exchange or Stock Market
Organized marketplace where buyers and sellers are brought together to buy and sell stocks.
Stocks
Stocks are one of the assets you can trade in binary options and it is a share of ownership of a particular company, For example, Google, Apple, BP, Facebook, Stocks confirm that the holder of the stocks has purchased a percentage of a company and as such is entitled to a profit sharing relative to the percent he/she has in the company.
Strike Price
The strike price is the price of the underlying asset at the exact moment at which the option is purchased, In binary options trading, when the option expires, the price of the underlying asset is compared to the strike price to determine whether the option has gained value or lost value.
Support
A historical price level at which falling prices have stopped falling and either moved sideways or reversed direction.
T
Target Price
In the One Touch trade option, the target price is the goal rate that the asset price needs to touch or surpass in order for the trade to end in-the-money.
Technical Analysis
Technical Analysis is one of two major schools of analysis, namely, fundamental market analysis and technical market analysis, Technical analysis is used to examine the historical data in order to predict future trends in the price of an asset, This form of analysis holds that all aspects of an asset price are built into its market price, As a result, certain trends can be deduced in order to determine which direction an asset will take.
Touch
Touch is a trade or an option whereby the asset reaches, ‘touches’ or surpasses a predetermined level, To be eligible for payout, it is sufficient that the predicted level is reached or surpassed only once during the life of the trade.
Trader
A client who buys and sells frequently with the objective of short-term profits.
Trading Account
An online account which is opened with a broker from which one can place trades.
Trading Hours
Each asset has its own trading hours, trading days and holidays, That is, you cannot trade all assets 24 hours a day, 7 days a week, In order to see each asset’s trading hours, you can view the Asset Index.
U
Underlying Asset
In binary options trading, a trader is not buying or selling assets but instead that are simply making a prediction on the direction of the price movement of the asset, Assets in binary options are therefore referred to as underlying assets, Options Maker offers a wide range of internationally traded underlying assets such as stocks, currency pairs, indices and commodities, Detailed information on these underlying assets can be found in the Assets Index.
Underlying Asset Types or Classes
There are four main underlying asset types or classes in binary options trading and they include as follows: 1. Currency Pairs or Forex such as USD, EUR, CHF, ZAR 2. Stocks such as Google, Apple, British Airways 3. Indices such as FTSE 100, NASDAQ, Dow Jones 4. Commodities such as gold, oil, sugar.
V
Volatility
A measure of the amount by which an underlying asset is expected to fluctuate in a given period of time.
Volume (Vol)
The amount of shares bought and sold on a stock exchange.
Y
Yield
The rate of return on an investment.