Binary Options Glossary
Oct0
Binary Options
A binary option is when a buyer enters into a contract to purchase an underlying asset at a fixed price at a pre-determined time in the future.
Binary Options Trading
Binary Options Trading is a type of trading that allows investors to partake in stock, commodity and currency pairs trading, just with less risk and smaller premiums.
Index Options
These types of binary options are comprised of not just a single stock but of an index of many stocks, giving the trader diversification and opportunities to trade in particular sections of the market on a larger scale.
Index Options Trading
This type of binary options trading deals with index options that are not just single stock options but indexes comprising of many stocks.
Forex
The Forex, or the Foreign Exchange Market is an international market whereby foreign currencies are exchanged for one another. One of the largest financial markets in the world, it operates on a 24-hour basis through a non physical global network of banks, corporations and also individual currency traders.
Forex Options
In binary options trading, when trading in Forex options you are predicting the movement of set currency pairs like EUR/GBP (the euro against the pound) or AUD/USD (the Australian dollar against the US dollar). These currencies make up one of the largest financial markets in the world, otherwise known as the Forex, or the Foreign Exchange Market where traders can deal 24-hours a day, 5 days a week. Trading on how well a particular currency is doing alongside another, traders can make informed predictions on currency pairs and with the added comfort of short expiration times that is common when trading in binary options.
Forex Options Trading
When dealing in forex options trading you are predicting the movement of currencies against each other, comprising as one of the largest profit gaining financial markets in the world, the Forex (Foreign Exchange Market).
Commodities
A commodity is a physical raw substance that is sold or bought by investors across the financial market.
Commodity Options
When investing in commodity options you entering into contracts that give you right, but not the obligation to the movement of a commodity stock in the market. This means that, instead of buying stocks outright and falling victim to the either profitable or non-profitable price outcome of it, you are simply predicting the movement of the commodity and whether it will rise or fall.
Commodity Options Trading
In binary options trading, trading in commodity options allows investors to trade in some of the most well known commodities in the market, such as gold, oil, silver and copper. Thought by many as an easy market to trade in, there being only forty commodities to trade in, and easy to follow, with movements often relating to world affairs, it is an attractive option.
Indices
This is the plural term for a singular index. In the stock market, indices are groups of stocks put together in particular ways, representing a portfolio of stocks or commodities.
Currencies
Currencies are traded in pairs, trading one currency against the other. Currencies rise and fall according to the markets demand for it, rising if the market’s demand for it is greater than the available supply and falling if the demand is lower than it. All financial trading of currency pairs takes place on the Forex, or the Foreign Market Exchange.
Stocks
A stock is a small share or piece of ownership of a chosen business or company that gives the owner claim to a share of their earnings.
Stock Options
When you purchase a stock option you are entering into a contract that deems you the right, but not the obligation to its shares. In other words, you are not physically purchasing a stock outright and relying on the stock doing well, you are simply predicting the direction that the stock will move and betting on this outcome.
Stock Options Trading
In binary options trading, trading in stocks is always a popular choice for investors. With big, well known names featuring in the market, it is easy for investors to keep up-to-date with breaking news and sudden changes and fluctuations to their chosen stock.
Binary Options Trading Platform
There are many different types of Binary Options trading platforms. All web-based, they allow investors to trade binary options on selections of stocks, currency pairs, indices and commodities. Each trading platform competitor offers unique trading benefits to the investor as they each contend to be the most worthwhile trading utility for customers.
Binary Options Brokers
Binary Options Brokers or binary options trading platforms are online internet based sites whereby investors can trade in binary options from the comfort of their very own computer screen. Each broker is individual to the next, each offering investors a plan with varied attributes.
Digital Options
A digital option or a binary option is an investing route in which the pay-out of the stock is pre-determined in the contract from the onset of the purchase. Also known as the “all or nothing route”, when an investor purchases a digital option there are only ever 2 possible outcomes; 1. An in-the-money result will earn the investor the fixed return plus their original premium back or 2. An out-of-the-money result will deprive them only of their original premium, and in some cases even compensate them with a 15% return.
Fixed Return Options
In binary options trading, fixed return options offer many investors a safer way to invest in the stock market than conventional stock investing. The benefit to the investor of making a purchase with a fixed return is the security of knowing exactly what they would earn if the option finished in-the-money.
Call Option
In binary options trading, a call option is what an investor purchases when they believe that the chosen stock will rise above the current price.
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Binary Options and Binary Options Trading
Sep0
Binary Options Trading is when a buyer enters into a contract to purchase an underlying asset at a fixed price at a pre-determined time in the future. The owner does not buy the asset itself, rather the option to buy it. The fixed price at which the owner buys or sells at, is known as the strike price.
In binary option trading, the potential gain or loss is known at the onset of the contract and it is determined by the amount invested by the owner. So, there are only two possible outcomes: or the option expires in-the-money and the owner receives a 65-71% payout; or the option expires out-of-the-money and the owner receives nothing. However, if binary option trading is carried out with anyoption™, an owner receives a 15% payback if his option expires out-of-the-money.
There are 3 aspects to the trade: the underlying asset, the expiry time and the direction the asset will move in.
The underlying asset is the item which is being traded. This could be a range of products: currencies (e.g. USD/GBP), commodities (e.g. Oil, Gold), stocks (e.g. Microsoft, Coca Cola) or indices (e.g. Nasdaq, FTSE 100).
The expiry time is the pre-determined time which defines the option’s end. The option can end at the end of the hour, day, week or month.
The direction the asset will move can either be up (known as a call option) or down (known as a put option). A buyer purchases a call option, if he thinks that by the expiry time, the asset will be above the strike price. He places a put option if he believes that by the expiry time, the asset’s price will be below its strike price.
This makes binary option trading very flexible.
The buyer can control the asset, expiry time and predicted asset direction. Due to the fixed return nature of options, the buyer also knows the potential gain or loss from the trade – he must only wait so see the direction the asset will move in.
A buyer can trade binary options on an online options trading platform such as anyoption™ which is a new binary option trading platform available for private and institutional investors worldwide. It is 100% web based, and does not require software download or any other previous trading experience. The interface is self explanatory and easy to use, the range of assets that options are offered on is incomparable and the speed and accuracy of settlements is flawless. The most advanced and stable technologies are used to ensure the safety and satisfaction of traders.
This means that anyone can start trading immediately. Just open an account with anyoption™, deposit money and follow the simple process:
- 1.Select the currency pair which will be traded on e.g. USD/EUR, GBP/JPY.
- 2.Choose the investment amount for the selected binary option. This can be anything from $50 to $3,000 (or equivalent), though multiple trades can take place simultaneously.
- 3.Decide if the asset is likely to increase or decrease. If increase then select a call option, if decrease then select a put option.
- 4.Choose an expiry time –end of the hour, day, week or month
All a buyer must do is then wait for the expiry level of the chosen binary option to be finalized and displayed in the trading box. If the option expires in the money then the buyer makes between 65%-71% profit. If the option expires out-of-the-money then he receives a 15% payback of the initial investment.
There are several reasons why trading in binary options is rising in popularity:
- 1.The risk involved is totally controlled and known by the option buyer. Should the option expire out-of-the-money, he will only lose 85% of his investment amount.
- 2.There must only be an incremental change in asset price for the buyer to profit - a move of only a 4th decimal point can render the option in-the-money and yield profits for the buyer
- 3.A buyer does not need in-depth knowledge of the market in which he’s trading – he requires a sense of direction of an asset, since magnitude of the asset movement is not important
- 4.Binary option trading is extremely flexible, with a buyer able to select the asset, expiry time and price direction to suit his needs
