Forex TermsBinary or Digital Options are a relatively new way of trading in the global financial markets. Trading binary options can only have two outcomes for a trader, Win-or-Lose (0/1). If the trade is correct (win), the trader may earn payouts of 65-95%. If the trade loses, the trader may get a refund back (0-15%). In most cases, the sum of the Payout and the Refund Rates does not exceed 90% of the value of the initial trade.

 

Advantages -Why Trading Binary Options?

There are a few good reasons for trading Binary Options, here are the most important ones:

1) You may trade any popular financial market (Forex, Stocks, Indices, Commodities, etc)

2) You don’t have to pay any Margin on a trade (No Margin Calls)

3) You may profit from both a Bull or a Bear (falling) Market

 

Disadvantages -Why Trading Binary Options?

1) Extremely risky asset class

2) Legal restrictions in many countries

3) Not easy to find reliable binary options brokers

» Binary Options Strategies

The Basics when Trading Binary Options

Here are the basic terms when trading binary options:

  • Call / Put: It defines if you trade a Bull Market (Call) or a Bear Market (Put)

  • Expiry date: Defines the duration of an opened position

  • Strike price: It is the price that defines the Win/Loss

  • Payout: It defines the Return you get if your trade wins

  • Refund Rate: It defines the Refund you get if your trade loses

 

Which are the Most Common Types of Binary Options?

There are many types of traded binary options, here are the most common types:

1) High / Low Options – Traders predict if a market move Above or Below a specific price level

2) Touch / No Touch Options – Traders predict if the price of an asset reaches (Touch) or not (No Touch) a specific price before it expires

3) 60 Sec Options –Trade the market in 60 sec (it is very risky and we certainly do not recommend this type of trading binary options)

4) Boundary Options – Traders predict if the price of a particular asset expires within or without a specific price range

 

Which Financial Markets Can I Trade using Binary Options?

Almost every kind of Financial Market / Financial Traded Asset is available today for Binary Options Traders:

1) Forex Market

The Forex Market is one of the most popular financial markets in the world. You may trade pairs such as EUR/USD, GBP/USD, USD/JPY, EUR/AUD, etc. Here are the most popular Forex pairs that are called ‘The Majors’:

  • EUR/USD | GBP/USD | USD/JPY | CHF/USD | USD/CHF | USD/AUD | USD/NZD | USD/CAD

2) Stocks & Indices

You may trade all popular stocks from the US and Western Europe plus stocks in Asia and more. Popular indices are also available such as Nasdaq, Dow Jones, S&P 500, DAX, FTSE, etc.

3) Commodities

There are many commodities available for trading using Binary Options. The most popular is Gold but you may trade also Silver, Copper, Platinum, Natural Gas, and Oil. Some brokers offer also Corn, Wheat, Sugar, Cotton Coffee, etc.

 

Binary Options Bonuses

Almost every Binary Options Broker offers a Welcome Bonus nowadays. Be careful a high deposit bonus is important but it is certainly not the most important issue that you should consider:

  • No-Deposit Bonus

This type of bonus is offered to new traders. You receive free cash to trade but in order to be able to withdraw it, you must first trade about 20 times its size.

  • Deposit Bonus

It is a bonus offered mainly to new traders. Deposit Bonuses in the Binary Options Industry can be from 30% to 100%. As in the case of a No-Deposit Bonus, in order to be able to withdraw a Deposit Bonus, you must first trade about 20 times its size.

  • Loyalty Bonus

It is a type of bonus offered to existing clients as an incentive to re-deposit funds.

 

BINARY OPTIONS GLOSSARY 

Financial Asset

An asset is an underlying instrument that is used to determine the type of exercise of a binary option contract. An asset may be a Forex Currency, a Commodity, a Stock, or an Index. Underlying assets are also called Underlying Securities.

At-the-Money Option

The at-the-money option is the contract in which the strike price equals the market price of the underlying asset. This point can be described also as a Break-Even-Point point.

Binary Options ορ Digital Options

Binary options are financial contracts that offer only two possible outcomes, either they are in-the-money and they win, or they are out-of-the-money and they lose. There are two main categories of binary options:

  • Binary call options, win if the price of the underlying security at expiration exceeds the strike price.

  • Binary put options, win if the price of the underlying security at expiration is below the strike price.

 

Early Closure

Early Closure is an option provided to an option holder, which allows him to close a trade (open position) earlier than the predefined expiration time.

Expiry Time

Expiry Time is the date when a binary option expires.

Exotic Options

Exotic Options are contracts that are traded on exclusive markets by certain brokers. Binary Options are a simplified version of Exotic Options.

Fundamental Analysis

Fundamental analysis is used to examine and report macroeconomic data such as growth, political developments, and policies of central banks. Fundamentalists are trying to determine if the market price of an asset is undervalued or overvalued related to its true value.

In-the-Money Options

In-the-money options are binary options contracts whose current price is above the strike price. If a binary options contract is in the money when it expires, then a predefined profit is gained by its holder.

Over-the-Counter (OTC)

OTC contracts are financial instruments that are sold directly between two parties.

Out-of-the-Money Options

Out-of-the-money options are binary options contracts whose current price is below the strike price. If a binary options contract is out-of-the-money when it expires, then its holder suffers a loss.

Payout Rate

The Payout Rate is the rate of return of a binary option contract when it expires in the money. Typically, the binary options payout rate is between 70% and 85%.

Refund Rate

Refund is the amount refunded to the investor if a binary option doesn’t expire in the money.”

Strike Price

The Strike Price of a binary option contract is the price at which the contract for an asset will be exercised.

Technical Analysis

Technical analysis is a set of tools and techniques used to analyze the price trend of a financial asset. Technical Analysis can be used in a wide time frame, from intraday to several years. The observation of past price patterns may indicate a profitable trade but also the best time to buy or sell it.

Touch / One Touch Option

One-Touch Option is a Binary Option Type that allows a profit to be realized if the underlying security touches a predetermined price level before the contract expires.

 

Binary Options Glossary

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