Commodities Underlying Binary option specification Price This is the real-time market price of the asset traded in the underlying contract.
For most trades, the market price is used as the benchmark price for the trade strike price. Some online platform allow traders to choose a different price as strike price e.
Contract This is the basic unit of an options trade. In conventional options, a contract is made up of units of the asset, but in binary options, whatever the trader has chosen as investment amount will serve as the contract value.
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Bid The bid price is the premium price that a trader will pay to the dealer for opening an option to sell a contract, or to close a buy order. Sell This is a term used to define a bet strategy which is based on an expectation that the price of the underlying asset will drop. A trader will use a PUT on an open sell order.
Ask This is the premium price that a trader will pay for buying a position from the dealer. This is equivalent to placing a CALL trade on a position anticipating an increase in the price of the underlying market.
It is also binary option specification price paid by a trader who has an open position to sell and wants to close it out. Spread This is the difference between the bid price and ask price. In any market, an increase in trade volume or increase in liquidity will tend to cause the spread to narrow.
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The reverse is also the case: little volume and liquidity will cause spreads to widen. Commission Fee This is a service charge that the trader pays on each transaction in the market.
This is usually a fixed fee as opposed to the spread which is variable. Different firms charge different commissions.
Online binary options brokers do not charge separate commissions. The charges are billed into the trade. Conclusion These terms explained above are the key features of binary options contracts, and they will be encountered whether the trader operates on NADEX or on one of the regulated and uregulated online binary options platforms.
As a trader it is your responsibility to understand what these terms mean in practice. Most brokers should provide this information in their help section together with additional information on how to trade on their platform.
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