Glossary

Master the terminology so you can learn and trade with confidence


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Asset/Underlying Asset Definition

This is the financial instrument on which your binary option or spread is based. Assets are sometimes called markets. Asset classes included forex, stock indices, and commodity futures. Individual assets are things like the EUR/USD pair, Gold, or the S&P 500 index. Find out more

At the Money Definition

When the underlying (indicative) market price is equal to a binary option’s strike price, the binary option is “at the money.” At expiration, only in-the-money options get the $100 payout, so an at-the-money binary option will still expire worthless. Find out more


Bearish and Bullish Definition

Bearish traders (or traders with a bearish opinion) believe a market will go down. Bullish means you believe a market will go up. Bearish and bullish are sometimes used to describe markets or trends themselves. Find out more

Binary Options Definition

Binary options are limited risk contracts based on a simple yes/no market proposition. Find out more.

Broker Definition

A broker places trades to the exchange on behalf of the client. Some brokers also advise or help clients place trades. Nadex members can place orders directly to the exchange and don’t need to use a broker. Find out more


Commodities Definition

Commodities are actual things that are usually consumed and used, including metals like gold and silver, grains like corn and soybeans, and fuels like crude oil and natural gas. Various factors including supply, demand, weather, and political unrest can affect their prices. Nadex offers binary options on these and other commodities. Find out more

Currency Definition

Currencies of advanced economies are exchanged for each other based on prices that constantly fluctuate. Currencies are traded in pairs and form the world’s largest financial market by far, with trillions of dollars exchanged daily. Nadex offers 10 of the most popular currency pairs, including the EUR/USD, JPY/USD, and AUD/JPY. The currency market is commonly called forex, short for foreign exchange. Find out more

Current Price, Underlying Indicative Market Price Definition

Nadex offers free, real-time price data. Most providers either provide delayed prices or charge exchange fees to their customers for real-time data. This means all Nadex underlying indicative markets reflect the actual price being traded at that instant. Find out more


Expiration Definition, Expiry Definition, Expiration Time Definition, Expiration Date Definition

The point in time at which the Expiration Value is calculated. For most Nadex contracts, exchange members can leave orders to trade right up until this point. However, please note that some Events markets may close prior to Expiration. Find out more

Expiration Value

The calculated level of the underlying market at Expiration, as determined by Nadex (except for Economic Events where it is determined by the relevant source agency). Nadex uses the following processes to calculate Expiration Value:

Nadex Stock Indices and Commodities Contracts:

  1. Take the last 25 trade prices in the underlying market
  2. Remove the highest 5 prices and the lowest 5 prices
  3. Take the arithmetic average of the remaining 15 prices and round to one decimal point past the point of precision of the underlying market (with the exception of Wall Street 30, which is rounded to the same point as the underlying market)

Nadex Forex Contracts:

  1. Take the last 10 midpoint prices in the underlying market
  2. Remove the highest 3 prices and the lowest 3 prices
  3. Take the arithmetic average of the remaining 4 prices and round to one decimal point past the point of precision of the underlying market

Nadex Bitcoin Contracts:

All Nadex Bitcoin binary options are settled by the last tick before expiration of the Tera® Bitcoin Price Index. Find out more


Floor and Ceiling levels Definition

The lower and upper limits against which the expiration value is compared in order to produce the Settlement Value. The Settlement Value cannot be below the Floor or above the Ceiling. Find out more

Floor-Ceiling Range Definition

The distance between the Floor and Ceiling values. The size of the Floor/Ceiling range may vary from time to time according to conditions in the underlying market. Find out more

Forex Definition

Forex, short for foreign exchange, is the name for the currency market and includes the EUR/USD and AUD/JPY. Find out more


In The Money Definition

When the underlying (indicative) market price is greater than a binary option’s strike price, the binary option is “in the money.” At expiration, only in-the-money options get the $100 payout, so “in the money” refers to the option being profitable. Find out more

Index, Stock Indices

A stock index such as the S&P 500, FTSE, or Nasdaq is a weighted average of a selection of stocks from a certain sector of industry. It reflects the overall value of that sector.

Instrument (Financial Instrument)

Another term used interchangeably with "asset" and "market", which can refer to underlying stock indices, commodities, forex pairs, or the Tera® Bitcoin index.


Nadex Indicative Index Value

The calculated level of the underlying market, as determined by Nadex. Nadex uses the following processes to calculate the Nadex Indicative Index Value for different markets:

Nadex Stock Indices and Commodities Contracts:

  1. Take the last 25 trade prices in the underlying market
  2. Remove the highest 5 prices and the lowest 5 prices
  3. Take the arithmetic average of the remaining 15 prices and round to one decimal point past the point of precision of the underlying market (with the exception of Wall Street 30, which is rounded to the same point as the underlying market)

Nadex Forex Contracts:

  1. Take the last 10 midpoint prices in the underlying market
  2. Remove the highest 3 prices and the lowest 3 prices
  3. Take the arithmetic average of the remaining 4 prices and round to one decimal point past the point of precision of the underlying market

Nadex Bitcoin Contracts:

The Indicative Value of Nadex Bitcoin binary options is based on and reflects the price of the Tera® Bitcoin Price Index.


Out of the Money

When the underlying (indicative) market price is less than a binary option’s strike price, the binary option is “out of the money.” At expiration, only in-the-money options get the $100 payout, so an “out of the money” will expire at zero. Prior to expiration, the option will have a variable value based on how close it is to the strike price.


Settlement Value

At expiration, a binary option contract is settled and determined to be in, at, or out of the money. The settlement value factors in the floor and ceiling levels of spreads to decide what the profit or loss will be for that spread contract.

Binary options must have a settlement value of either 0 or 100. Spreads must have a settlement value no lower than their floor level and no higher than their ceiling level.

Strike Price

The strike price is the price level you think the market will be above or below at expiration. If you think the market price (expiration value) will be above the strike, you buy the option. If you think the market will be at or below the strike price, you sell the option.

The market's price at expiration is compared to the strike price to determine whether your binary option has settled in, at, or out of the money.

Source Agency

In the case of economic events contracts, the publisher of the expiration value. For example, the US Bureau of Labor Statistics is the source agency for the Nonfarm Payroll number.

Speculative Position Limit

The maximum aggregate position that any person can hold or control in any particular contract class. These are sometimes needed to prevent mistakes.

Strike Width

The distance between strike prices for a particular market.


Tick Size, Point Size

The amount the market price must move for the price to move up or down one tick in value. If the tick size is one for a contract, then one unit of price movement will change the contract’s value by one. Many markets have fractional tick sizes. For example, a tick size of 0.01 means that a movement of 0.01 in the price would change the profit or loss by one tick.

Tick/Point Value

The dollar value of one tick/point. This is $1 for all Nadex contracts. Other markets have more complicated tick values, dating back to older pricing traditions, such as bushels and ounces. Sometimes tick size and tick value are used interchangeably, especially when both values are one, as in the case of Nadex contracts.

Trading Day

On Nadex, trading days start the previous evening and continue through the full trading day that follows it.

Trading days always start at 6:00pm ET, Sunday through Thursday. They continue without interruption until 5:00pm ET the following day, Monday through Thursday, and until 4:15:00pm ET on Friday.

Trading Day

Open

Close

Monday

6:00pm ET Sunday

5:00pm ET Monday

Tuesday

6:00pm ET Monday

5:00pm ET Tuesday

Wednesday

6:00pm ET Tuesday

5:00pm ET Wednesday

Thursday

6:00pm ET Wednesday

5:00pm ET Thursday

Friday

6:00pm ET Thursday

4:15pm ET Friday

Saturday

Closed

Closed

Trading Hours

The times of day during which the contract will be open for trading on the exchange. Most Nadex contracts are open 23 hours a day, 6 days a week. See the specific contract details for exact information.


Underlying Market

The source market that expiration values are based on. For example, the US 500 contract is based on the Standard & Poor’s 500 stock index, known as the S&P 500.