This article will show you the basic terms in binary options trading.
Binary Options: Many people see binary options trading as a hassle free method of investing in the worldwide financial markets. It is a type of trading known worldwide for its speed. Compared to the traditional type of trading where only the elite traders had access to investing money, binary options trading has opened up the market to traders from all walks of life.
What are Binary Options?
Binary options are contracts that give a trader the right but they are not obligated to buy an underlying asset at an agreed price and specified period of time. Unlike purchasing shares or stocks, with binary options you are not actually buying anything. If you are interested in the best Australian binary options brokers, then go to our homepage.
The Basic Terminologies of Binary Options Market:
It is important that you familiarize yourself with the following binary option market terminologies.
Binary options – the word binary means that there are two possible outcomes you will make a profit if your prediction is correct or if your prediction is wrong you will lose money. It al depends on your initial investment whether you gain or lose money.
Call option – this is the option an investor uses when they want to predict an increase in the value of an underlying asset. No mater how little the price increases the trader will make money from binary options.
Put option – this is the option a trader will use when he/she is predicting that an underlying asset will decrease in value. Again, no matter how small the decrease, the trader will make money from binary options.
In the money – if you predict the trade correctly, this is the term that is used. Foe example, if you chose the call option and the price of the asset increased then you have won the trade (in the money) in binary options terms. The same applies to the put option and the price decreases you are still in the money.
Out of the money – if you have called the trade incorrectly then you have lost the trade (out of the money) in binary terms. If for example you chose a call option but the asset decreased in value, you have lost the trade and are out of the money. If you chose the put option and the price increased, you are also out of the money.
At the money – If an asset expires at the same price as it was at the start of the trading time it is known as at the money. If this occurs it means that your prediction was not right or wrong. Then you full binary options premium will be returned to you.
Expiry date – this is the specified time or date that the chosen binary option will expire. At the expiration time it will then be decided if you are in the money or out of the money.
More on Binary Options
Binary options are very simple but it needs to be remembered that a crucial element is time and must be adhered to. Also you should analyze the market as this will give you a greater chance of making money, while lack of knowledge could be very expensive.