Underlying Instrument

An “Underlying Instrument” is the index, commodity, or currency which forms the basis for every trade contract. See “Instrument”.

Underlying Asset

An “Underlying Asset” is the index, commodity, or currency which forms the basis for every trade contract. See “Asset”.

Strike Price

The “Strike Price”, also known as the “Exercise Price”, is the price of the underlying “Asset” or “Instrument” at the time the trade is placed. The strike price forms the basis of the trade contract. At the trade’s “Expiry Time”, the asset’s “Expiry Price” gets compared to the strike price to determine whether the trade contract finished either “In-The-Money” so the trader wins and is entitled to the payout for the winning trade, or “Out-Of-The-Money” so the trader loses and is entitled to no payout.

Stakes

The amount of funds allocated to the purchase of the option or trade.

Return

The return is the total amount you will receive when your trade finishes “In-The-Money”. For example a profit of 100% on a $100 stakes trade would yield a total return of $195 (stakes + profit = total return). In this case the profit is 100% but the total return is 200% because you receive your trade stakes back in full plus the profit when your trade finishes “In-The-Money”.

Put Option

“Put Option” is where the trader buys the option with the prediction that the expiry price will be lower than the strike price.

Profit

The “Profit” is the amount that you “Win” or “Earn” when you make a successful trade. For example if the profit is 100% and you stake $100 in the trade, if the trade finishes “In-The-Money”, you earn $95 plus you receive your trade stakes back for a total return of $195 or 200%.

Out-Of-The-Money (OTM)

Being “Out-Of-The-Money” simply means that your trade has lost. A trade will lose where you incorrectly predict an asset’s price will be higher than the strike price at the expiry time, or where you incorrectly predict the asset’s price will be lower than the strike price at the expiry time, you will be “Out-Of-The-Money” meaning that your trade will have lost and your loss is limited to the trade stakes only.

In-The-Money (ITM)

Being “In-The-Money” simply means that your trade has won. Where you correctly predict an asset’s price will be higher than the strike price at the time of expiry or correctly predict the asset’s price will be lower than the strike price at the time of expiry, you will be “In-The-Money”. When you win or are “In-The-Money”, you will receive your trade stakes back plus the profit so for example if the profit is 100% and you stake $100 in the trade, you will receive $195 for a total return to you of 200%.

Instrument

The “Instrument” or “Asset” is the underlying index, stock, commodity, or currency on which each trade is based.

Each instrument is a unique tradable asset. Some instruments are traded on multiple exchanges in which case they are different and have different ticker symbols, e.g. Google is GOOG on NASDAQ and GGQ1 on Frankfurt Stock Exchange. Make sure when trading you are researching the correct underlying instrument.