Single Payment Options Trading - SPOT


DEFINITION of 'Single Payment Options Trading - SPOT'

A type of option product that allows an investor to set not only the conditions that need to be met in order to receive a desired payout, but also the size of the payout he or she wishes to receive if the conditions are met. The broker that provides this product will determine the likelihood that the conditions will be met and, in turn, will charge what it feels is an appropriate commission. This type of arrangement is often referred to as a "binary option" because only two types of payouts are possible for the investor:

1. The conditions set out by both parties occur, and the investor collects the agreed-upon payout amount.

2. The event does not occur and the investor loses the full premium paid to the broker.

BREAKING DOWN 'Single Payment Options Trading - SPOT'

This type of option product is often found in the forex market. For example, if a trader believes that the EUR/USD will not break below 1.20 in 14 days, he or she would pay a certain premium to a broker and then collect the agreed upon payout in 14 days if this scenario turns out to be accurate. However, if the EUR/USD does break below 1.20, the investor will lose the full amount of the premium.

  1. Commission

    A service charge assessed by a broker or investment advisor in ...
  2. Barrier Option

    A type of option whose payoff depends on whether or not the underlying ...
  3. Exotic Option

    An option that differs from common American or European options ...
  4. Broker

    1. An individual or firm that charges a fee or commission for ...
  5. Forex - FX

    The market in which currencies are traded. The forex market is ...
  6. Premium

    1. The total cost of an option. 2. The difference between the ...
Related Articles
  1. Options & Futures

    Introduction to SPOT Options

    Single-payment options trading (SPOT) allows investors to have full control over their investments.
  2. Options & Futures

    Combining Forex Spot And Futures Transactions

    The spot, futures and option currency markets can be traded together for maximum downside protection and profit.
  3. Options & Futures

    Getting Started In Forex Options

    Stocks are not the only securities underlying options. Learn how to use FOREX options for profit and hedging.
  4. Credit & Loans

    Pre-Qualified Vs. Pre-Approved - What's The Difference?

    These terms may sound the same, but they mean very different things for homebuyers.
  5. Options & Futures

    Cyclical Versus Non-Cyclical Stocks

    Investing during an economic downturn simply means changing your focus. Discover the benefits of defensive stocks.
  6. Insurance

    Cashing in Your Life Insurance Policy

    Tough times call for desperate measures, but is raiding your life insurance policy even worth considering?
  7. Fundamental Analysis

    Using Decision Trees In Finance

    A decision tree provides a comprehensive framework to review the alternative scenarios and consequences a decision may lead to.
  8. Options & Futures

    Understanding The Escrow Process

    Learn the 10 steps that lead up to closing the deal on your new home and taking possession.
  9. Options & Futures

    Terrorism's Effects on Wall Street

    Terrorist activity tends to have a negative impact on the markets, but just how much? Find out how to take cover.
  10. Forex Strategies

    3 Simple Strategies For Euro Traders

    Euro traders can execute three simple but effective strategies that take advantage of repeating price action.
  1. Is it possible to trade forex options?

    Yes. Options are available for trading in almost every type of investment that trades in a market. Most investors are familiar ... Read Full Answer >>
  2. How do hedge funds use equity options?

    With the growth in the size and number of hedge funds over the past decade, the interest in how these funds go about generating ... Read Full Answer >>
  3. Can mutual funds invest in options and futures?

    Mutual funds invest in not only stocks and fixed-income securities but also options and futures. There exists a separate ... Read Full Answer >>
  4. How is the value of a pip determined?

    A pip in foreign exchange trading is a measure of a price movement in a currency pair. "Pip" is an acronym for price interest ... Read Full Answer >>
  5. How does a forward contract differ from a call option?

    Forward contracts and call options are different financial instruments that allow two parties to purchase or sell assets ... Read Full Answer >>
  6. How can an investor profit from a fall in the utilities sector?

    The utilities sector exhibits a high degree of stability compared to the broader market. This makes it best-suited for buy-and-hold ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Take A Bath

    A slang term referring to the situation of an investor who has experienced a large loss from an investment or speculative ...
  2. Black Friday

    1. A day of stock market catastrophe. Originally, September 24, 1869, was deemed Black Friday. The crash was sparked by gold ...
  3. Turkey

    Slang for an investment that yields disappointing results or turns out worse than expected. Failed business deals, securities ...
  4. Barefoot Pilgrim

    A slang term for an unsophisticated investor who loses all of his or her wealth by trading equities in the stock market. ...
  5. Quick Ratio

    The quick ratio is an indicator of a company’s short-term liquidity. The quick ratio measures a company’s ability to meet ...
  6. Black Tuesday

    October 29, 1929, when the DJIA fell 12% - one of the largest one-day drops in stock market history. More than 16 million ...
Trading Center