Glossary

If you're not completely familiar with EZTrader or how binary options work, the glossary below could prove helpful for learning some common terms & phrases and getting yourself up-to-speed.

Binary Options

Binary options, also known as digital options, or all-or-nothing options, are contracts which have only two possible outcomes - either they win, or they lose -- therefore binary by nature.

A binary option involves a fixed payout after the underlying stock meets or exceeds its predetermined threshold or strike price.

Values of binary options payouts are determined at the start of the contract and aren’t affected by the magnitude of movement of the stock value.

Binary call options pay the predetermined amount providing the price of the underlying security exceeds the strike price at expiration.

Similary, binary put options pay the predetermined price if the price of the unerlying security is trading at less than the option strike price at expiration.

Binary Call Options
Binary call options gain value when the underlying security is trading at more than the strike price at expiration. Select "Call" to predict that the underlying security will exceed the option's strike price at expiration.

Binary Put Options
Binary put options gain value when the underlying security is trading at less than the strike price at expiration. Select "Put" to predict that the underlying security will fall below the option's strike price at expiration.

Payout
The amount of money earned from a trade.

Strike Price
The strike price is determined by the price of the underlying security at the moment at which the option is purchased. When the option expires, the price of the underlying security is compared to the strike price to determine whether the option has gained value ("in the money") or lost value ("out of the money").

Expiration
The time and date at which the value of the underlying asset is judged against the strike price to determine payoff. At expiration, the option becomes void an ceases to trade.

In the Money
An option is said to be "in the money" if the option gains value upon expiration. A put option is "in the money" if the price of the underlying security is below the strike price. A call option is "in the money" if the price of the underlying security is above the strike price.

Out of the money
An option is said to be "out of the money" if the option loses value upon expiration. A put option is "out of the money" if the price of the underlying security is above the strike price. A call option is "out of the money" if the price of the underlying security is below the strike price.

At the money
An option is at-the-money if the strike price of the option equals the market price of the underlying security. This can also be considered the "break even point" since the option neither gains in or loses value and the payout equals the original amount traded.