Binary Options Trading Terms
You don’t need to memorize all the financial jargon used in binary options trading. All you need to do is familiarize yourself with some of the commonly used terms and you are set to go. We have prepared a list that will help you come trading day.
1) Ask– the price set at which the option can be exchanged
2) Bid– the price entered by an investor at which the option could be bought or sold at the various exchanges
3) Binary Options– also known as a “fixed return option” and “digital option”; pays a fixed amount of cash where payout is determined at the onset of the contract. The option cannot be sold before the expiry time ends.
4) Call– This is the binary option that will expire “in the money” when the underlying asset is above the strike price at expiration. It will expire “out of the money” when the underlying asset is below the strike price at expiration.
5) Expiry Time– refers to the point where an option either pays or expires. Usually within a minute, the hour, a day or a week.
6) Put Option– This is the binary option that will expire “in the money” when the underlying asset is below the strike price at expiration. It will expire “out of the money” when the underlying asset is above the strike price at expiration.
7) Strike Price– the price of the underlying asset. This sets whether the outcome expired “in the money” or “out of the money”.
8) Touch Options– refers to a special category in Binary Options where a prediction is made on the price of the asset, whether the price will approach and surpass a certain value by the expiry time.
a. Touch Up– pertains to the touch value above the prevailing market price
b. Touch Down– pertains to the touch value below the prevailing market price
9) Trading hours– the period assigned for assets that are open for trading. Currencies are available for trading 24/7. However, other assets are assigned specific hours.
10) Underlying Asset– this refers to the four major categories where the whole binary options trading are based on: Commodity, Currency, Indices and Stocks.
A term that most investors need to be acquainted with is “Volatility”. A market is said to be volatile when there are drastic fluctuations, up or down, which happens in a fast pace. The variations in the market can be measured are a projected in analysis reports, which can help investors make a sound financial decision when purchasing options.