Single Payment Options Trading - SPOT

AAA

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.

INVESTOPEDIA EXPLAINS '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.

RELATED TERMS
  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. Premium

    1. The total cost of an option. 2. The difference between the ...
  4. Exotic Option

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

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

    The market in which currencies are traded. The forex market is ...
RELATED FAQS
  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 >>
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. Options & Futures

    Give Yourself More Options With Real Estate Options

    Real estate options have many benefits, including a smaller initial capital requirement.
  5. Options & Futures

    The Most Important Technical Indicators For Binary Options

    Trading binary options is not for the novice, but if you're ready to delve in, get to know the best technical indicators.
  6. Forex Education

    Trading Forex With Binary Options

    Binary options are an alternative way, with a major advantage, for traders to play the forex market.
  7. Investing

    How To Take Advantage Of A Stronger U.S. Dollar?

    If you are invested in the market, you will feel the effects of a stronger dollar, especially if overseas interests are part of your diversified portfolio
  8. Options & Futures

    The Fancy Way To Diversify Your Portfolio: Precious Metal Options

    A guide with strategies on how to invest or trade in precious metals by using options.
  9. Options & Futures

    When And How To Take Profits On Options

    Here are the different criteria to ensure maximum profit taking while trading options.
  10. Options & Futures

    How To Trade Jobless Claims with Binary Options

    Binary options on events typically have economic data such as nonfarm payrolls or jobless claims as the underlying. We explain.

You May Also Like

Hot Definitions
  1. Subsidy

    A benefit given by the government to groups or individuals usually in the form of a cash payment or tax reduction. The subsidy ...
  2. Sunk Cost

    A cost that has already been incurred and thus cannot be recovered. A sunk cost differs from other, future costs that a business ...
  3. Technical Skills

    1. The knowledge and abilities needed to accomplish mathematical, engineering, scientific or computer-related duties, as ...
  4. Prepaid Expense

    A type of asset that arises on a balance sheet as a result of business making payments for goods and services to be received ...
  5. Gordon Growth Model

    A model for determining the intrinsic value of a stock, based on a future series of dividends that grow at a constant rate. ...
  6. Cost Accounting

    A type of accounting process that aims to capture a company's costs of production by assessing the input costs of each step ...
Trading Center