Nearly all of the terms that you will come across that are used in connection with binary options trading are also common terms used in the main markets. When applied to options trading , these terms are associated with both active price placement and the final standing at the time that the trade ends. An ITM In the Money placement indicates that in an active binary options trade, the asset price is presently in a profitable position.
For instance, should you have decided upon a Call position and the asset price is now higher than the price point when the trade was initiated, then that trade is said to be in the money at that point.
In a closed trade, an ITM placement is one which ended in the placement you anticipated and so, ended in profit. In an open trade, it indicates that the asset price is presently in a position that will not return a profit. An out of the money end occurs when your asset price forecast was not correct and therefore you lose your investment money. Needless to say, it is ideal for binary options trades to be in OTM placements as infrequently as is possible.
If too many trades are finishing out of the money, corrections need to be made to your strategy and approach. An additional term is used which describes a tie. The ATM position in an active trade is one wherein the closing asset price is identical to the entering price.
In a trade that has ended, it means an end result of the closing price being precisely the same as the beginning, or entering price. When this happens, the investment funds are returned to you, the trader. Essentially, the position closes as a tie. ATM placements are not particularly rare during times when a market is very active , and not many positions close in an ATM position. Any kind of price activity that pushes the asset price in a different direction from the entry price point whether it be up or down is going to be a determining factor when the trade ends.
Note that the final outcome of all positions will be determined by comparing the entry price with the closing price. Some amount of price movement will always be required in order for the trade to be profitable or result in a loss. Even the smallest amount of price activity is enough to determine the outcome, a fact which means that profits and losses can certainly come from relatively flat market movement. Binary options trading is extremely unique in that it provides many different situations in which profits can be earned.
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