Glossary

 | Numbers | A | B | C | D | E | F | G | H | I | | L | M | N | O | P | Q | R | S | T | U | V | W |

A

Above Option

Also known as “Call.” The formal term for an option that has a closing price that is higher than its purchasing price.

American-Style Option

An option that can be exited at any time up to the expiration date. Unlike a regular option, which can only be exited at the expiration date.

Arbitrage

Selling and purchasing financial instruments simultaneously, in order to benefit from price discrepancies.

Ask Price

The price at which a seller is offering to sell an option or a stock.

Asset

Underlying financial instrument used to determine the strike price of the contract. They are generally categorised as commodities, stocks, currency pairs or indices.

At The Money

A term that describes an option with a strike price that is equal to the current market price of the underlying stock.

Averaging Down

Buying more of a stock or an option at a lower price than the original purchase so as to reduce the average cost.

B

Bearish

An adjective describing the opinion that a stock, or a market in general, will decline in price.

Bid Price

The price at which a buyer is willing to buy an option or a stock.

Binary Options

Options which allow traders to earn a fixed amount if they correctly predict whether the value of the underlying asset will reach above or below the strike price when it expires. If traders incorrectly predict the direction of the asset’s value, they lose their investment.

Black-Scholes Formula

The first widely-used model for option pricing. This formula can be used to calculate a theoretical value for an option using current stock prices, expected dividends, the option’s strike price, expected interest rates, time to expiration and expected stock volatility. While the Black-Scholes model does not perfectly describe real-world options markets, it is still often used in the valuation and trading of options.

Break Even Point(s)

The stock price(s) at which an option strategy results in neither a profit nor a loss. While a strategy’s break-even point(s) are normally stated as of the option’s expiration date, a theoretical option pricing model can be used to determine the strategy’s break-even point(s) for other dates as well.

Broker

A person acting as an agent for making securities transactions. An ‘Account Executive’ or a ‘broker’ at a brokerage firm deals directly with customers. A ‘Floor Broker’ on the trading floor of an exchange actually executes someone else’s trading orders.

Broker Ratings

Buy, sell, or hold recommendations or ratings given to individual company stocks by securities analysts, depending on how they think the stock will perform in the short- or long-term.

Bullish

An adjective describing the opinion that a stock, or the market in general, will rise in price.

Buy

You ‘buy’ a market if you think it will rise (if you are opening a new bet). You also ‘buy’ to close out an existing ‘sell’ bet.

Boundary / Range Instrument

A boundary or a range of instruments that allows a trader to set a specific range for the binary option. The trader decides whether the price of an asset will be within or without the set range once the option expires. The range is specified by higher and lower target price limits.

Bonus

Finance that is added to a trader’s account. Bonus money allows traders to have more leverage and depth when trading. Bonuses have specific terms and conditions, and it is highly recommended to read these bonus policies prior to accepting it.

Buy Me Time

A feature that might exist in some trading platforms. The Buy Me Time feature allows traders to add time to their open positions and postpone its expiration.

Buy Me Out

A feature that might exist in some trading platforms. The Buy Me Out feature lets traders close an open trade early, and receive a partial return on their investment.

Below Option

Also known as “Put.” The formal term for an option that has a closing price that is lower than its purchasing price.

Beta

A figure that shows how much the stock tends to move with the market as a whole.

Bid Price

The amount a trader is willing to place on the position.

Bid/Ask Spread

There’s a difference between the prevailing bid and ask price. Generally, option contracts that are liquid, tend to have a tighter bid/ask spread while option contracts that are not as liquid, tend to have a wider bid/ask spread.

C

Cable

Trader jargon referring to the Sterling/US Dollar exchange rate. So called because the rate was originally transmitted between the London and New York exchanges via the transatlantic telegraph cable in the mid-1800s.

Call Option

Trader jargon referring to the Sterling/US Dollar exchange rate. So called because the rate was originally transmitted between the London and New York exchanges via the transatlantic telegraph cable in the mid-1800s.

Carry Trade

An investor sells a certain currency with a low interest rate and uses the funds to purchase a different currency at a higher interest rate, thus capturing the difference, or profit, between the two rates.

Cash Settlement Amount

Settlement of a futures contract in cash rather than in the physical asset underlying the contract.

CBOE

The Chicago Board Options Exchange

CBOT

Chicago Board of Trade

Central Bank

A government or quasi-governmental organisation that manages a country’s monetary policy. For example, the U.S. Central Bank is the Federal Reserve, and the German Central Bank is the Bundesbank.

Charts

Visual representations of raw data. Investors can learn to spot recurring patterns on financial charts to help them make informed decisions about a market or a company.

Class of Options

A term referring to all options of the same type, either calls or puts, covering the same underlying stock.

Closing

The process of ending an existing trade. Closing a trade results in a profit or loss being realised.

Closing Price

The final price of a security at which a transaction was made.

CME

Chicago Mercantile Exchange

COMEX

Commodity Exchange Inc, New York

Commodity

A basic good used in commerce which is usually uniform across producers and can be traded on an exchange. Soft commodities are goods that are grown, such as coffee and sugar, while hard commodities are extracted through mining, such as gold and coal.

Contract Size

The quantity of goods or commodities underlying futures, forward and option contracts. Most equity options have a contract size of 100 shares.

Cover

An act of lowering risk exposure by closing an open position. This term is used most frequently to describe the purchase of an option or stock to close out an existing downwards position for either a profit or loss.

Credit

Money received in an account either from a deposit or a transaction which increases the account’s cash balance.

Crude Oil (& WTI)

The unrefined state of petroleum, Crude Oil is one of the world’s most important and well-traded commodities. WTI or West Texas Intermediate is a type of low sulphur crude oil or sweet crude, used as an oil benchmark or marker.

CSCE

Coffee, Sugar and Cocoa Exchange

Currency Pair

The two currencies that comprise a Forex rate. A Forex rate is the amount that the first currency in the pair is worth expressed in terms of the second currency.

Charting

The practice of plotting an option’s price at successive points in time. It is a tool often used to aid in technical analysis.

Cash Settlement

Options which, when exercised, deliver the profit in cash instead of an underlying asset.

Contract Neutral Hedging

A static hedging technique that involves the buying of 1 put option, or selling 1.

D

Day Trade

A position (stock or option) that is opened and closed on the same day.

Delta

A measure of the rate of change in an option’s theoretical value for a one-unit change in the price of the underlying stock.

Deposit

The funds required as an initial outlay in order to open a trading account. This is not to be confused with the amount that the trader chooses to place on a trade.

Depreciation

A fall in the value of an asset.

Digital Option

Another name used for a binary option. It has fixed payout and fixed loss.

Discount

An adjective used to describe an option that is trading at a price less than its intrinsic value.

Discretion

Freedom given by an investor to his floor broker or Account Executive to use his own judgment regarding the execution of an order.

Down Trade

A trade backing a particular price to fall.

Downtrend

A price trend characterised by a series of lower highs and lower lows.

Delta Neutral

When positive Delta Options and negative Delta Options offset each other to produce a position that neither gains nor decreases in value as the underlying stock moves slightly up or down.

Derivatives

A financial instrument, whose value is derived in part from the value and characteristics of another financial instrument. Examples of derivatives are options and futures.

E

Economic Indicator

A statistic that indicates current economic growth and stability, or the lack of it. Common indicators include employment rates, Gross Domestic Product (GDP), inflation, retail sales, etc.

Equity

Ownership, or what a person, company or account has to its name.

Equity Option

An option on shares of an individual common stock or exchange traded fund.

EUREX

European Exchange, Frankfurt

European Central Bank (ECB)

The Central Bank for the new European Monetary Union

European Style Option

An option that can be exercised only on its expiration date and not before.

Exercise Price

The price at which the owner of an option can purchase (Call) or sell (Put) the underlying stock. Used interchangeably with striking price, strike, or exercise price.

Exotic Options

These are types of options used exclusively by big time traders before they were available to the public. Binary options are simplified versions of exotic options.

Expiration Cycle

The calendar cycle of expiration months that is assigned to basic exchange-traded stock options. Although some options have contracts in every month, most equity options are traded with expiration months in every quarter.

Expiration Date

The date at which an option and the right to exercise it cease to exist.

Expiry Time

The time and date at which a binary option will automatically expire.

Expiry Level

The underlying asset’s value once the option expires.

EMA’s / Estimated Moving Averages

Indicators that traders can use to see moving averages of underlying assets price movements.

Expire Worthless

When out of the money options lose all their value and expire.

Extrinsic Value

Also known as “Premium Value” or “Time Value.” It is the difference between an option’s price and the intrinsic value.

Early Closure

When a trader has the ability to close an option. This immediately leads to the expiration and cease of the contract.

F

Federal Reserve (FED)

The Central Banking system for the United States.

Fill

The execution of an order.

Fill or Kill Order (FOK)

A type of option order which requires that the order be executed completely or not at all. If the order cannot be completely executed (i.e., filled in its entirety) as soon as it is announced in the trading crowd, it is to be ‘killed’ (i.e., cancelled) immediately.

Financial Industry Regulatory Authority (FINRA)

The Financial Industry Regulatory Authority (FINRA), is the largest independent regulator for all securities firms doing business in the United States.

FINEX

Financial Instrument Exchange, New York

Fiscal Policy

The use of government spending and taxation to influence macroeconomic conditions.

Fixed Income

When an investment yields a regular or fixed return.

Floor Broker

A trader on an exchange floor who executes trading orders for other people.

Floor Trader

An exchange member on the trading floor who buys and sells for his or her own account.

Foreign Exchange (FX or Forex)

The simultaneous buying of one currency and selling of another.

FTSE

The FTSE 100, 250 and 350 are the best-known stock indices in the UK and are used primarily to bench mark the performance of UK companies by market capitalisation. The constituent companies within each index are calculated quarterly. Informally known as the ‘Footsie’, the indices are maintained by FTSE Group, which is jointly owned by the Financial Times and the London Stock Exchange.

Fundamental Analysis

One of the major types of analysis used when trading to predict stock prices. Traders analyse companies by taking into account sales, earnings, products or services, and analyse the economy by taking into account factors like GDP, interest rates and unemployment. This differs from technical research, which uses past prices and trading to predict future prices.

Future (Forwards)

A future or forwards rate is notionally an agreement to conduct a transaction at some specified time in the future where the price is agreed now. Often the price of a future or forwards bet will differ from the cash price.

Fixed Return

A profit percentage that doesn’t vary as the asset’s value changes. For example, at Banc De Binary you can find high fixed returns of up to 91%, which you’ll receive on every successful trade regardless of the asset’s value.

Flip

Changing your position on the current market rate. You can usually flip your position up to 5 minutes or so before the option expires.

Fibonacci Retracements

Also known as Fibs or fib lines. Created via measuring very specific points in a price movement. These are used as an indicator to help determine what a price is likely to do.

Financial Instrument

A physical or electronic document that has intrinsic monetary value or transfers value. For example, cash, shares, futures, options and precious metals are financial instruments.

G

Gap

The phenomenon of a market trading at a price away from the previous traded price without trades occurring at intervening prices. Usually, but not necessarily, relates to when a market resumes trading after a period of closure.

GDP

Gross Domestic Product, the total value of all final goods and services produced by the economy. A key measure of national income and output for a country’s economy.

Gamma

The rate of change of a stock option’s delta, for one unit change in the price of the underlying stock.

Greeks

A set of mathematical criteria involved in the calculation of stock option prices.

H

Hedge (Hedged Position)

A position established with the specific intent of protecting an existing position. For example, an owner of common stock may buy a put option to hedge against a possible stock price decline.

Historic Volatility

A measure of actual stock price changes over a specific period of time.

HKFE

Hong Kong Futures Exchange

Holder

Any person who has made an opening purchase transaction, call or put, and has that position in a brokerage account.

High/Low

High/Low selection, (often referred to as Call/Put) is an option where the buyer predicts whether or not an asset’s price at expiry will be higher or lower than the strike/target price. If a trader chooses High (Call), they are actually predicting the strike price of the option will increase. If a trader selects Low (Put) they are predicting it will decrease below the strike price.

High Option

An option on a High/Low instrument offers a fixed return of up to 85%, only if the underlying asset expires at a higher level than the option target price.

I

Illiquid Market

In an illiquid market, a small amount of business often moves prices by a disproportionate amount, and bid and offer prices can be far apart.

In-the-money

This is a term used to describe when an investor reaches a position when they realise profit. A call option is in the money if the expiry price is above the strike price. A put option is in the money if the expiry price is below the strike price.

Index

A compilation of several stock prices into a single number, for example, the S&P 100 Index.

Index Option

An option whose underlying interest is an index. Generally, index options are cash-settled.

Individual Volatility

The volatility percentage that justifies an option’s price. A theoretical option pricing model can be used to generate an option’s individual volatility when the quantifiable factors (stock price, time until expiration, strike price, interest rates, and cash dividends) are entered along with the price of the option itself.

Institution

A professional investment management company. Typically, this term is used to describe large money managers such as banks, pension funds, mutual funds, and insurance companies.

Instrument

Another term used for assets.

Interest Rate Futures

Interest rate futures allow you to take a view on all the main interest rate contracts, including Short Sterling, Gilt, Bund, Eurodollar, JGB and T-Bond. With short-term interest rate contracts, you can bet on the direction of a country’s three-month interest rates. This means that if you think short-term interest rates will fall, you ‘buy’ and if you think rates will rise, you ‘sell’.

Investment Amount

This is the amount of money used to purchase the binary options contract. It is the money at stake for a put or call option.

IPE

International Petroleum Exchange, London

ISE

International Securities Exchange

Inbound Option

An option on a Boundary/Range Instrument that expires within the limits of the set boundary.

Indicators

Data markers that indicate the strength, and significant trends of a nation’s economy.

Inflation

The rate at which the price of goods and services rise within an economy, or the rate in which money loses its value over time. In most economies, a healthy inflation rate is under 3%. Negative inflation (deflation) is considered dangerous to economies.

Initial Margin Requirement

The amount needed as available trading resources in a trader’s account in order to open a position.

IPO

Initial Public Offering. Private company’s first offer of stock to the public.

Intrinsic Value

The value of an option if it were to expire immediately with the underlying stock at its current price.

L

Last Dealing Time

The last time (on the last dealing day) you may trade on a particular market.

Last Trading Day

The last business day prior to the option’s expiration date during which purchases and sales of options can be made. For equity options, this is generally the third Friday of the expiration month.

LIFFE

London International Financial Futures Exchange

Liquidity (Liquid Market)

A trading environment characterised by high trading volume, a narrow spread between the bid and ask prices, and the ability to trade larger sized orders without significant price changes.

Listed Option

A put or call traded on a national options exchange. In contrast, over-the-counter options usually have non-standard or negotiated terms.

LME

London Metal Exchange

LSE

London Stock Exchange

Lagging Indicators

Economic indicators that follow rather than precede a country’s overall pace of economic activity.

Leading Indicators

Economic indicators that change before the economy changes.

Leverage

A technique to multiply gains and losses. Most often used when buying more of an asset with borrowed funds. (Also referred to as “gearing”)

LIBOR

London Interbank Offered Rate.

Long

A buy position opened in the expectation that the market price will rise.

M

Margin (Margin Requirement)

The minimum equity required to support an investment position. To buy on margin refers to borrowing part of the purchase price of a security from a brokerage firm.

Mark To Market

An accounting process by which the price of securities held in an account are valued each day to reflect the closing price or market quote. As a result the equity in an account is updated daily to properly reflect current security prices.

Market Maker System

A method of supplying liquidity in options markets by having market makers in competition with one another. They are similarly charged with making fair and orderly markets in a given class of options.

Market Quote

A quotation of the current best bid / ask prices for an option or stock. This information is usually obtained by the investor from someone at a brokerage firm. However, for listed options and stocks, these quotes are widely disseminated and available.

Model

A mathematical formula used to calculate the theoretical value of an option.

Monetary Policy

The procedures by which a government or central bank seek to affect macroeconomic conditions by influencing the supply and availability of money.

MSE

Milan Stock Exchange

Multiple Listed (Multiple Traded Option)

Any option contract that is listed and traded on more than one national options exchange. NASDAQ A key index, this was the world’s first electronic stock market, and is traditionally home to many high-tech stocks such as Microsoft, Intel, Dell and Cisco.

Minimum Trading

The minimum amount required to execute a binary option. This amount varies by broker

Margin

The deposit or available credit needed on your trading account in order to keep your positions open.

Margin Call

A call from the credit department for further funds to be deposited in the account to support additional exposure from running losses.

N

Neutral

An adjective describing the belief that a stock or the market in general will neither rise nor decline significantly.

NYFE

New York Futures Exchange

NYMEX

New York Mercantile Exchange

NYSE

New York Stock Exchange

NYSE AMEX

American Stock Exchange

No Touch

The counterpart of the One Touch instrument. With this option, the price of an asset should not reach the target price during the lifetime of the option. If at any time the price of the asset does reach the target price, it will instantly expire ‘out-of-the-money.’

Non-farm Payrolls (NFP)

One of the US’ most important economic indicators, which measures the employment rate in the country, except for the farming industry. Such release will define a further direction of the American dollar. The data is published on the first Friday of every month.

O

Offer / Offer Price

In the options business this means the same as ask / ask price, or the price at which a seller is offering to sell an option or a stock.

OMLX

London Securities and Derivatives Exchange

One Cancels Other Order (OCO)

An order stipulating that if one part of the order is executed, then the other part is automatically canceled. Can be useful for investors with limited funds.

Open Interest

The total number of outstanding option contracts for a given underlying stock.

Opening Transaction

An addition to, or creation of, a trading position. An opening purchase transaction adds call options to an investor’s total position, and an opening sale transaction adds put options.

Option

A contract that gives the owner the right, but not the obligation, to buy or sell a particular asset at a fixed price, the strike price, for a specific period of time until expiration.

Option Period

Sometimes referred to as an option’s lifetime, this is the time from when an option contract is created by a writer of that option to the expiration date.

Option Pricing Curve

A graphical representation of the estimated theoretical value of an option at one point in time, at various prices of the underlying stock.

Option Pricing Model

The first widely-used model for option pricing is the Black Scholes. This formula can be used to calculate a theoretical value for an option using current stock prices, expected dividends, the option’s strike price, expected interest rates, time to expiration and expected stock volatility. While the Black Scholes model does not perfectly describe real-world options markets, it is still often used in the valuation and trading of options.

Optionable Stock

A stock on which listed options are traded.

Options Clearing Corporation (OCC)

A registered clearing agency whose shares are owned by the exchanges that trade listed equity options, OCC is an intermediary between option buyers and sellers. OCC issues and guarantees all listed option contracts.

OSE

Osaka Securities Exchange

Out-of-the-money

This is a term used to describe when an investor reaches a position where they experience loss. A call option is out-of-the-money if the expiry price is below its strike price. A put option is out of the money if the expiry price is above its strike price.

Over The Counter (Over The Counter Market)

A national association having many characteristics of an exchange. Rather than a floor or physically central market place, trading takes place via computer terminals.

Owner

Any person who has made an opening purchase transaction, call or put, and has that position in a brokerage account.

One Touch

An instrument that helps the buyer set a target value for an asset to reach when the option expires. If it does reach the target value, then the buyer is ‘in-the-money.’ Otherwise, the buyer will fall short and will be ‘out-of-the-money.’

Outbound Option

An option on a Boundary/Range Instrument that expires out of the limits of the set boundary.

Out of the Money

The point when a purchased option has no gain and the trader takes a loss on their investment. An option is out-of-the-money if the trader places a High (Call) option and the options price expires below the target price. If a Low (Put) option is placed then the trader is out-of-the-money when the options price expires above the target price.

Order Execution

The Order Execution tool allows a trader to determine how their trades will be executed. Since market prices vary, some of the trade requests don’t receive an approval. Thus, we are thrilled to introduce additional execution types that ensures traders’ orders are always approved at the best current available price.

Option Writer

Also called the option seller, an option seller grants the right to trade a security at a given price in the future.

P

Parity

When an option’s theoretical value is equal to its intrinsic value, it is said to be ‘worth parity’. When an option is trading for only its intrinsic value, it is said to be ’trading for parity’. Parity may be measured against the stock’s last sale, bid, or offer.

Payout

The profit realised when the contract expires in-the-money. Banc De Binary typically offers a 70% – 91% payout.

Pip

A ‘Percentage In Point’ is generally the fourth decimal place, i.e. 0.0001. Traditionally, a pip was the smallest point by which a Forex rate could move, although with modern advances in precision this is no longer the case.

Point

The increment in price movement that results in you making or losing your trade size.

Position

The combined total of an investor’s open option contracts (calls and / or puts) and long or short stock.

Position Trading

An investing strategy in which open positions are held for an extended period of time.

Profit / Loss Graph

A graphical presentation of the profit and loss possibilities of an investment strategy at one point in time, at various stock prices.

Put Option

It is one of the two option choices. If a trader believes that the value of the underlying asset will drop to a lower value at the time of expiry, then they can purchase a call option.

Platform

Used by binary options brokers to allow individual traders to execute trades. Although the majority of platforms are similar in many ways, each presents unique features.

Portfolio

Each trader’s collection of financial investments.

Q

Quote

The two-way market price that a broker makes for a given instrument. Since it is two-way, you can buy or sell, according to whether you think the price will rise or fall.

R

Realised Gains & Losses

The net amount received or paid when a closing transaction is made and matched together with an opening transaction.

Resistance

A term used in technical analysis to describe a price area at which rising prices are expected to stop or meet increased selling activity. This analysis is based on historic price behavior of the stock.

Risk

Exposure to uncertain change, most often used with a negative connotation of adverse change.

Risk Management

If you are new to trading it is possible to make substantial losses as well as substantial profits. You can manage your risks via controlled risk trades, making it possible to put an absolute limit on potential losses.

Rolling

A trading action in which the trader simultaneously closes an open option position and creates a new option position at a different strike price, different expiration, or both.

Rollover

The procedure whereby a trade approaching expiry is closed and a trade of the same size and direction is opened for the next period, thereby prolonging the exposure to a particular market.

Running Profit & Loss

How your open trades are doing: the unrealized money that you would gain or lose on your open trades if they were closed at prevailing market prices.

Refund

A portion or the full amount of a trader’s investment is often refunded if their option expires ‘in-the-money.’ Some brokers may even refund the trader with a portion of their investment – on average around 15% – if their option expire ‘out-of-the-money.’ Check each broker for refund options.

Return

The amount the trader stands to make if the option they’ve purchased expires in the money. Returns can depend on the instrument used as well as the specific asset and different brokers. The return value should be clearly stated before a trader purchases their option, so they always know what they stand to gain or lose. For example: if a trader makes an investment of $100 and the return was 85%, the trader would stand to gain $185 after the option expires, if the trader is in the money.

Range Instrument

The Range instrument allows traders to decide whether the option will expire within or without the given price range.

Range Option (Boundary Option)

A type of binary option for which the trader predicts whether the asset’s price will end within a specified price range, or outside of it.

Rebate or Refund

The amount returned to the trader if a binary option expires out of the money. Typically, the rebate is expressed as a percentage of the investment amount.

Real Time

A real-time stock or bond quote is one that states a security’s most recent price as opposed to a delayed quote.

Resistance Level

A price level above that it is difficult for a security or market to rise.

S

SAF

South African Futures Exchange

SEC

The Securities and Exchange Commission. The SEC is an agency of the federal government which is in charge of monitoring and regulating the securities industry.

Sector

The name for a group of securities or companies in the same market or industry.

Sell

You ‘sell’ a market if you think it will fall (if you are opening a new trade). You also ‘sell’ to close out an existing ‘buy’ trade.

SFE

Sydney Futures Exchange

SGX

Singapore Exchange

Shares

A unit of ownership, usually in a corporation, that entitles the owner to a share of profits in the form of a dividend.

Slippage

The difference between the level of a Stop order and the actual price at which it was executed. Can occur during periods of higher volatility when market prices move rapidly or gap.

SOFFEX

Swiss Options and Financial Futures Exchange

Spot

The price for a currency, index, commodity or share for immediate settlement or delivery.

Standard Deviation

A statistical measure of price fluctuation. One use of the standard deviation is to measure how stock price movements are distributed about the mean.

Stock Index

A compilation of a number of stocks into one total price, expressed against some base value from a specific date, thus allowing investors to easily follow the performance of certain groups of stocks.

Strike (Strike Price)

The price at which the owner of an option can purchase (call) or sell (put) the underlying stock. Used interchangeably with striking price, strike, or exercise price.

Support

A term used in technical analysis to describe a price area at which falling prices are expected to stop or meet increased buying activity. This analysis is based on previous price behavior of the stock.

Stock Exchange

The place where shares and stocks or other securities are bought and sold.

Short

A sell position opened in the expectation that the market price in that asset will fall.

Stop Loss Order

An order to close a position at a particular level when the price moves against the trader.

Stop Order

An opening or closing of an order to buy or sell at a worse price, to where the market is currently trading.

Straddle

Purchase or sale of an equal number of Puts and Calls with the same terms at the same time.

Strangle

Buying or selling an ‘out-of-the-money’ Put option, and Call option on the same instrument, with the same expiration. Profits are made only if there is a drastic change in the instrument’s price.

T

Technical Analysis

A method of predicting future stock price movements based on the study of historical market data such as (among others) the prices themselves, trading volume, open interest, the relation of advancing issues to declining issues, and short selling volume.

Theoretical Value

The estimated value of an option derived from a mathematical model.

Tick

The smallest unit price change allowed in trading a security. For listed stock and options, this is generally 1/8th of a point. However for a listed option under $3 in price, this is normally 1/16th of a point.

Trader

This refers to any investor who makes purchases and sales. It can be a member of an exchange who conducts his or her buying and selling on the trading floor of the exchange.

Trading Pit

A specific location on the trading floor of an exchange designated for the trading of a specific option class or stock.

Trading Hours

The time when an asset is traded. Each asset has its own trading hours and/or trading days; in addition to holidays.

Technical Analysis

A method of evaluating an asset by studying statistical data related to its historical performance, such as past prices and volume. Charts and graphs, in addition to other research tools, are utilized to identify any possible patterns that may be indicators of future activity.

Trend

Refers to the movement of a price over a period of time; as the time period of a price movement extends in a continuous direction, it reflects a trend. Recognition of a trend allows traders to make informed decisions based on the probability of the future direction of assets.

Trader Choice

The trader choice tool allows traders to view other trader’s positions – by this, traders can mimic other traders’ behavior.

U

Underlying Asset Types

The type of asset refers to which financial category each asset falls into. The main asset types that are available to trade in are Stocks, Commodities, Indices and Currencies. Examples of asset types and their assets:
• Stocks: Google Inc, Apple Inc
• Commodities: Gold, Silver, Crude Oil
• Indices: FTSE-100, Nasdaq
• Currencies: USD, GBP, EUR

V

Volatility

A state where the market changes rapidly or suffers from extreme fluctuations.

W

Withdrawal

Drawing money from a trading account after making successful investments. A withdrawal can take some time depending on the broker and also cost depending on which method you have chosen to withdraw your funds with.