Glossary

Ask – The price (or offer) that the seller is willing to sell at.

Asset – The ‘instrument’ of the contract, i.e. the Commodity, Stock, Currency Pair or Index.

At-the-Money – A situation when the contract ends/expires with the trade/asset at the same price as when it was entered into. When this happened, the trader is refunded and does not lose or gain any money.

Appreciation – The term used to describe an increase in the value of an asset.

Arbitrage – A technique whereby traders enter into more than one trade at opposite positions, in order to increase the likelihood of making smaller profits regardless of the outcome. This could take place as one ‘call’ and one ‘put’ placed on the same asset/instrument at the same time.

Balance of Trade – A country’s total export value after subtracting imports.

Bar Chart – A simplified chart used to illustrate opening, closing, high and low prices of any given trade.

Base Currency – The primary currency used by a trader or investor to track and record accounts/activities.

Bear – An investor who predicts that the market or price will decline.

Bear Market – A market that is experiencing an extensive downward slide to such an extent that investors have become pessimistic about it.

Bid – The price offered by the trader for the asset or trade in question.

Binary Options – A type of trade where there can only be one of two outcomes – ‘call’ or ‘put’ trading.

Bonds – Tradeable instruments where prices/values rise and fall in conjunction with interest rates.

Boundary Instrument – A binary options tool wherein the trader predicts whether or not the asset (instrument) will fall inside or outside a predetermined set of values (boundary) when the option expires.

Call Option – The option chosen by a trader when they believe the asset’s price will be HIGHER at the scheduled expiry time.

Capital Markets – Medium and long-term investment markets, generally of at least one year in length.

Central Bank – The organization responsible for printing a country’s money and generally overseeing monetary policy.

Closed Position – Foreign currency exposures that no longer exist.

Confirmation – A document confirming the terms of any given transaction between the involved parties.

Contract – The standard unit of trading.

Currency – Any form of money that is authorized for use as legal tender in any country and represents a tradeable asset.

Currency Pair – Any two currencies that can be traded against one another, such as the GBP to USD.

Current Price – The price in near real time as reported. The term ‘current price’ is often used to contrast real-time reporting from most free price information, which is often delayed by fifteen minutes or more.

Day Trading – When trades are both opened and closed during the same single day of trading.

Deposit – The term used when money is lent or borrowed. Certificates of Deposits are tradeable instruments.

Expiry Price – The price of the asset at the time the contract expires. This is the price that will determine trader success when entering into ‘call’ or ‘put’ contracts.

Expiry Time – The pre-determined expiry time at which the asset expiry price will be determined.

Economic Indicator – Statistic on economic growth as reported by official and non-official groups and agencies alike. Examples include Gross Domestic Product (GDP), Employment Rates, Trade Deficits, Industrial Production, and Business Inventories.

Entry price – The price of the trade at the moment it is entered into.

End of Day (Mark-to-Market) – The term used when traders value their books at the end of each trading day, recording any profit or loss and beginning the following day’s trading with a net position.

Execution Date – The date any given trade is entered into.

Futures – A type of indirect security, which involves a contract wherein a trader will agree to sell or buy a commodity at a specific time in the future.

Fundamental Analysis – A principle that centers on the theory that while fast market movement will affect assets temporarily, a stable market price will eventually be reached and can be predicted by evaluating macroeconomic events.

Fixed Exchange Rate (Representative Rate) – The official exchange rate as established and published by monetary authorities.

Forex – Foreign Exchange – The process of buying one currency and selling another, which in the instance of trading is done for monetary gain.

Hedge – A position/s entered into in order to reduce the risk of a trader’s primary position.

Investment Amount – The sum of money (or stake) put on the line with any ‘call’ or ‘put’ option entered into.

Inbound Option – A binary options tool where the trader must predict whether any given asset will fall between a set of predetermined values by the time the contract expires.

Indices – Imaginary portfolios of securities representing either a full market or a portion of it.

Initial Margin – The required initial deposit in order to be able to enter a contract as a guarantee on future performance.

IMF – The International Monetary Fund

Inflation – An economic condition where purchasing power is eroded due to the accelerating prices of standard consumer goods.

Leading Indicators – Specific economic variables used by traders to help predict economic activity. Examples include the Consumer Price Index and official Unemployment Rates.

Leverage – The ratio of the amount used in a transaction to the required security deposit.

Liquidity – An instance where large transactions can be accepted by any given market without price stability being affected.

Low Option – Refers to a decline in the price level of any given asset.

Margin – The amount the trader must deposit in order to enter into a position.

No Touch Option – The opposite of touch options, where the trader makes the assumption that the asset price will NOT reach a certain level by the time the contract expires.

Offer – The price (or offer) that the seller is willing to sell at – aka ‘Ask’.

One Touch Instrument – When a trader predicts that an option WILL reach a certain price before the predetermined expiry time.

Over-the-Counter (OTC) – Assets and products that are sold/traded directly between two parties. Binary options are generally sold as OTC products.

Out-of-the-Money – When a trader is unsuccessful in any given trade and experiences financial loss.

Open Position – An active trade that hasn’t been offset by an equal and opposite trade.

Payout – The profit the trader takes home if the contract expires in-the-money. More often than not, binary options pay out at a rate of 75% to 85%.

Put Option – An instance where the trader enters into a contract predicting that the asset of their choice will be lower than its starting value when the contract expires.

Points, Pips – The smallest incremental move it is possible for any exchange rate to make.

Principle Amount – The original amount invested in an option or the face value of a bond.

Quote – Shows the lowest ask price and/or highest bid on a security at the time.

Range – The difference between a future’s highest and lowest price during a trading session.

Rate – A currency’s price in terms of a second currency.

Refund – The return of all or part of the sum invested in a contract in the instance that the option expires out-of-the-money

Resistance – A specific price level beyond which it is highly unlikely that the currency in question will increase.

Risk Management – The employment of strategic techniques devised in accordance with market analysis to minimize trading risks.

Roll-Over – An instance where the outcome of any given trade is delayed/carried over to another date.

Reuters – International news agency relied upon for real-time market updates and financial news.

Short – A term referring to the sale of an asset when the trader in question doesn’t actually own it.

Spread – The difference between the ask/offer price and the bid. Market liquidity is usually gauged using spread.

Support Levels – The opposite of resistance – a price ceiling and floor that determine where an exchange rate will correct itself automatically.

Target Price – A realistic maximum asset/instrument price as specified/predicted by traders using comprehensive analysis and market indicators.

Trading hours – The hours during which assets can be traded in any given country.

Time of Expiration – A predetermined time at which the contract/option will expire, at which time the success of ‘call’ and ‘put’ contracts will be determined.

Technical Analysis – The analysis of market data in order to help accurately predict prices and future activity.

Touch Option – A contract entered into where the trader predicts that the price of any given asset will be higher or lower than its current price at the time the contract expires.

Underlying Asset – The financial instrument upon which the contract and its terms are based.

Underlying Asset Types – The various types of tradable assets, usually stocks, commodities, forex currency pairs and indices.

Volatility – The measure of price movements over time, indicating whether fast and severe price changes are likely or whether the market is relatively stable.

Volume – How many securities or assets are traded in any given period.