Financial Betting Glossary
Bulls and Bears and Beyond. Terms for financial betting.
A
Ask
Also known as an offer, it is the price at which a trader will buy a currency or a seller is willing to sell.
Asset-or-Nothing Call Option
An option payoff that is equal to the asset's price if the asset is above the strike price, otherwise the payoff is zero.
Asset-or-Nothing Put Option
An option payoff that is equal to the asset's price if the asset is below the strike price, otherwise the payoff is zero.
At The Money Mean
An option is at-the-money if the strike price of the option equals the market price of the underlying security.
B
Base Currency
The currency used as the base to quote a pair.
In the case of a pair described as EURUSD, the EUR is the base currency; in the USDGBP, the USD is the base.
Bear Market
A market in which prices decline sharply in times of widespread pessimism. Opposite of Bull Market.
Bid
The price at which a trader will sell a currency.
Binary Option
A type of option in which the payoff is structured to be either a fixed amount of compensation if the option expires in the money, or nothing at all if the option expires out of the money.
Broker
Brokers are agents who handle investors' orders to buy and sell currency. Profit can be made by charging commission or through the spread as is the case in Foreign Exchange.
Bull Market
A market characterized by rising prices. Opposite of Bear Market.
C
Cash-or-Nothing Call
A type of option whose payoff is set to a specified fixed price if the final asset price is above the strike price; if not, the payoff is set to zero.
Cash-or-Nothing Put
A type of option whose payoff is set to a specified fixed price if the final asset price is below the strike price; if not, the payoff is set to zero.
Convertible Currency
Easily convertible currency that can be freely exchanged for other currencies (or gold) without special authorization from a central bank.
Currency pairs
The two currencies being traded. Example: EUR/USD denotes and Euros and US Dollars are the currencies being traded.
E
Expiration Date
The day on which an options or futures contract is no longer valid and, therefore, ceases to exist.
I
In The Money Mean
For a call option, when the option's strike price is below the market price of the underlying asset. For a put option, when the strike price is above the market price of the underlying asset.
L
Leverage
The credit provided by the online forex site to traders. Leverage is displayed as the amount each unit of funding in the account can be multiplied by for trading purposes. 1:50 is fifty times the account balance. If a trader has $500 and leverage of 1:100 then their leverage is $50,000.
Long
Traders buy currencies they think will go up. You are 'long' in a currency you are buying.
O
Offer
The price, or rate, that a willing seller is prepared to sell at. See also Ask.
Out Of The Money - OTM
For a call, when an option's strike price is higher than the market price of the underlying asset. For a put, when the strike price is below the market price of the underlying asset.
S
Short
Traders sell currencies they think will go down. You are 'short' in a currency you are selling.
Strike Price
The price at which a specific derivative contract can be exercised. Strike prices is mostly used to describe stock and index options, in which strike prices are fixed in the contract.
Also known as "Exercise Price"
