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.

RELATED TERMS
  1. Spot Premium

    The spot premium is the money an investor pays to a broker in ...
  2. Payout

    Payout refers to the expected financial return or monetary disbursement ...
  3. Payout Ratio

    Payout ratio is the proportion of earnings paid out as dividends ...
  4. Life Option

    Life option refers to an annuity payout scheme which guarantees ...
  5. Dividend Payout Ratio

    The dividend payout ratio is the measure of dividends paid out ...
  6. Single-Life Payout

    Single-Life Payout in a pension means only the employee will ...
Related Articles
  1. Trading

    Introduction to SPOT Options

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

    Is your forex broker a scam?

    While the forex market is slowly becoming more regulated, there are many unscrupulous brokers who should not be in business.
  3. Investing

    Lessons On Corporate Dividend Payout And Retention Ratio

    Why are dividend payout and retention ratios important to consider when investing in company stock? What companies have high ratios?What constitutes a high dividend payout and retention ratio? ...
  4. Trading

    Applying Binary Options To Equity Markets

    A binary option payout depends on the outcome of a “yes” or “no” proposition, related to the difference between underlying asset price and strike price.
  5. Investing

    Is Annuitization Your Best Strategy?

    Annuitization offers annuity owners an income stream they can't outlive, but there are pitfalls.
  6. Trading

    How To Hedge Stock Positions Using Binary Options

    Here’s a step-by-step method to hedge your long (and short) positions in stocks, using binary options.
  7. Investing

    How to Choose a Forex Broker: Everything You Need to Know

    Take your time when looking for a forex broker because a bad decision can be costly.
  8. Trading

    Trading forex with binary options

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

    Picking your first broker

    If you're a rookie investor, choosing a broker may be your first big investment decision. Learn more on whether you should you go with a full-service broker or a discount broker.
RELATED FAQS
  1. How do you calculate a payout ratio using Excel?

    Learn what the payout ratio is, what dividends per share and earnings per share are, and how the payout ratio is calculated ... Read Answer >>
Trading Center