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Binary options trading offers investors a quick and easy route to trading online. Fool-proof as it seems for many, there are still some trading terminologies that need to be understood when trading the binary options route. Only when you understand the whole picture of what binary options trading is all about will you then be in a good position to fully reap the benefits and start accumulating your trading success stories. Here we bring to you a short glossary of our hand selected top 5 binary option trading terminologies that will put you in good stead to start trading confidently.
Survival Glossary term # 1
Underlying Asset – This is a financial asset on which the price of a derivative depends on, as in a value that depends on another value. They come in the form of commodities such as oil and copper, indexes such as the Nasdaq and FTSE 100, stock such as Microsoft and Coca Cola and currency pairs such EUR/GBP and AUD/USD. Here at anyoption we offer trading on 61 underlying assets.
Survival Glossary term # 2
Call Option – This is one choice of options you can choose from when trading. When you place a call option on a chosen asset you would receive a profit if the asset expired at an increased level compared to that of it when it was purchased. For example, let’s say you choose to put a $200 Call option on British Petroleum which currently stands at 405.859 and offers a 70% return rate. If the option expires at even 0.001 above the strike price, at 405.860 for example, you would win the 70% return ($140) plus your original $200 premium back ($340 in total).
Survival Glossary term # 3
Put Option – At the opposite end to a Call option, a Put option provides the investor with a profit when the asset expires below the original purchase price and gives the buyer the right to sell stock at a pre-determined price. These options are often used to protect stock holdings from losses in the event of a decline in the market. For example, you purchase a Put option on the S&P Future of $100 which currently stands at 1,094.561 and has a 67% return rate as you feel it might drop from its current price. With a Put option, if the option expires below the original purchase price, by even 0.001 at 1,094.560 for example, you would win the 67% return ($67) plus your original $100 ($167 in total).
Survival Glossary term # 4
Expiry Time – Anyoption currently offers binary options with hourly, daily, weekly and monthly expiry times. The expiry time of an option is the time and date at which an option expires. Expiry times can be used as a tool when trading. For example, the lunchtime financial report advises that the EUR is up against the USD and looks to continue that way for now. A Call option with a 1-hour expiration time for this currency pair could be the early bird that caught that worm and because the expiration time is so short you can be sure the worm wouldn’t get away before the next report is due.
Survival Glossary term # 5
In-The-Money/Out-Of-The-Money – Quite simply, in-the-money is when the price at the time of expiry will earn your return of X% plus your initial premium. For Call options, an in-the-money result would occur when the expiry price is higher than the price at purchase and for a Put option you would be in-the-money if the price at expiration was lower than the price at purchase. Out-of-the-money results would be opposing results for each option.
Now you that have your tools, go get started!
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anyoption™ is a binary options trading platform offering a wide range of binary options on over 50 underlying assets. These include index options, forex options, commodity
options and stock options. Forex options trading can be carried out on 12 currency pairs. Stock options trading offers options on stocks in the Unites States and Europe.
Binary option trading on the anyoption™ platform offers a payout of 65-71% if an option expires in-the-money and a 15% return if the option expires out-of-the-money.