This comprehensive glossary includes common terms and lingo that is commonly used in binary options trading. This glossary will help you learn important terms so you can have a better understanding of the binary options trading.
Asset / Underlying Asset Everything you are trading and purchasing options against (currency, commodity, stock, index).
Boundary / Range Instrument A type of binary option in which you predict the price of an asset will remain within a given range of prices, or alternatively move outside the boundaries of such a range. Unlike most binary option types, the range or boundary instrument has two target prices, which define the range of the option.
Broker A firm or person that works as an agent for facilitating security transactions.
Call Option This is an option that predicts the price of an asset will increase in a given period of time. When you purchase a call option it is often said that you are going “long” on the market, which is another way of saying that you believe prices will increase.
Charts Visual representations of market data used by traders to analyze the market and make decisions about their trades.
Closing Price The market price of an asset at the moment that the binary option expires. It can also be called the expiry price or the expiry level.
Deposit Any money which is added to your brokerage account.
Economic Indicator A statistic that determines the level of economic stability and growth that is present in a particular country (i.e. GDP, employment rates, retail sales, etc).
Expiry Also called the contract period or contract duration, this is the lifespan of the binary option. Binary option expiries can range from as short as 30 seconds to as long as a month. It is critical because it does not matter what the price is during the life of the binary option, only where it is when the option reaches expiry time.
Financial Instrument Another term for assets like commodities, stocks, currencies and indices.
Funding Account The account you use to make deposits to your brokerage account. This includes credit cards, bank accounts, money market accounts, and online eWallets or digital banking accounts.
In the Money This is the term used to describe a trade that is successful or profitable. A trade can be in the money whenever it is within the winning conditions specified by the contract. A trade can change from in the money to out of the money at any time while it is still active.
Inbound Option When trading boundary or range options this describes an option that finishes in the money.
Investment Amount The amount that you place on any given trade. Each broker has minimum and maximum investment amounts for each individual trade
Liquidity A description of a trading environment that has narrow spreads and a high volume of trading.
Loss Refund / Rebate This is money which is returned or rebated to a trader when a trade is unsuccessful. Not all brokers offer loss refunds/rebates, but when they do the amount is typically 5-15% of the initial investment.
Market Price / Current Price The price of an asset at the present moment.
Out of the Money This is the opposite of an in the money trade, and is used to describe a trade which is unsuccessful or unprofitable. A trade can also move from out of the money to in the money at any time while the trade is still active.
Outbound Option When trading boundary or range options this describes an option that finishes out of the money.
Over the Counter A trading association similar to an exchange but instead of a physical market place or floor trading, is conducted through computer terminals.
Payout This is the expected return on your initial investment and is typically expressed as a percentage. Payouts are influenced by the length of expiry, the strike price, and the underlying volatility of the market you are trading in.
Put Option This is an option that predicts the price of an asset will decrease in a given period of time. When you purchase a put option it is also called going “short” on the market, which is another way of saying that you believe price will decrease.
Quote The broker’s two-way market price for a particular instrument. It is described as two-way because the trader can sell or purchase the instrument depending on whether they believe the price will rise or fall.
Risk Appetite The degree of risk you are willing to accept on any trade. This can be lower (also called conservative) or very high (also called aggressive).
Strike Price The market price of an asset at the time that the option contract is opened.
Underlying Asset Types
Withdrawal Any money which is taken from your brokerage account and returned to your funding account.