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Jargon of Binary Options What You should Know

Jargon of Binary Options

The following terms are basic trading terms of binary options what you may hear if you are already engaged with the binary options trading industry. The jargon of binary options is important for the traders to better understand the trading and trading platform. Once again let’s know about the Jargon of Binary Options.

binary options

1. Call Option: This is a specific agreement between the sellers and buyers which allow the buyers to buy the financial instruments at the given time and specific price. In simple by the call option traders buy an asset which value expected to rise before the trades expiry times.

In traditional binary options trading the earning or losing depends on the cost of the options. Also how far the strike price moves in the market depends on it. In binary options trading risks are limited to the invested amount and to a specific amount the profits are set, no matter how far the assets underlying price move above the trade strike price.

2. Put Option: This is the agreement between the sellers and buyers which allow the buyers to sell underlying assets within a specific time and price. In simple trades buy a put option expecting the price of the asset will fall down before the trade expiry time.

In traditional binary options trading the earning or losing depends on the cost of the options. Also how far the strike price moves in the market depends on it. In binary options trading risks are limited to the invested amount and to a specific amount the profits are set, no matter how far the assets underlying price move above the trade strike price.

3. Underlying Instruments/Assets: The assets on which the binary options trading is being structured. As the example currency pairs, commodities and stocks are the underlying instruments/assets and these are the base of binary options trading.

4. ATM/At the Money: Sometimes the strike price and underlying assets price are the same and this situation is referred as the ATM or At the Money. As the example, you buy an S&P 500 and its strike price is 1600. At the same time the S&P 500 trading price is also 1600, then your trading option is ATM or At the Money.

5. Refund: Sometimes the invested amounts on the trades returned to the traders. It’s call refund, this will happen when the trades expire on the ATM or At the Money. But this case is not so common in the binary options trading.

6. OTM/Out of the Money: In binary options trading the call options strike price can be above of the underlying future assets prices or the put options strike price can be below of the underlying future assets prices. This situation is referred as Out of the Money.

As the example, if the asset S&P 500 future trading price is 1600, for a call option it can be OTM or Out of the Money situation if the S&P 500 strike price goes above 1600. And if the asset S&P 500 future trading price is 1600, for a put option it can be OTM or Out of the Money situation if the S&P 500 strike price goes below 1600.

7. ITM/In the Money: This is a position what every binary options trader want because in binary options the ITM or In the Money means profitable position. In this situation for the call options the asset strike price stays below of the underlying future asset price, and for the put options, it stays above of the underlying future asset price.

For example, if the asset S&P 500 future trading price is 1600, for a call option it can be ITM or In the Money situation if the asset strike price stays below of 1600. And if the asset S&P 500 future trading price is 1600, for a put option it can be ITM or In the Money situation if the asset strike price stays above of 1600.

8. Payouts: After the end of ITM the return of percentage on the trader’s investment.

9. Digital Option or Binary Option: The option which has the fixed risks and fixed payouts within a specific time based on the correct predictions of the traders whether the asset price finishes above the strike price (call option) or below the strike price (put option).

10. Option Expiry Time: This is the time shows the expiry time of the trades, this could be 60 seconds to months.

11. The Early Closure: This is the feature of closing an option before the end of trade expiry time. The fact is you will not have this feature in all binary options brokers, some broker offers this feature in exchange for fees.

12. The Expiry Level: Expiry Level is the underlying asset price when ends the option expiry time. As the example, for a call option if the expiry level stays above of the asset strike price during the option expiry time, then your options are in the ITM situation and you will get paid for that trade.

13. Assets Market Price: Underlying assets current price in the real world.

Jargon of Binary Options Conclusion

In this article together we explore the basic and common terms of binary options trading. There can be more terms what we missed out. If we miss anything let us know through comments or our Contact Us form. We will update the information.

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