The Target Price is the price of an underlying asset at the specific time at which a trader opens a position when trading binary options. Other commonly used similar terms are ‘Strike Price’ and ‘Purchase Price’.
At the expiry time of an option, the Target Price is ultimately compared to the Expiry Price of the option and this determines whether the trade is In The Money (resulting in a win), Out Of The Money (resulting in a loss), or At The Money (resulting in a stalemate).
When trading binary options, if the expiry price being superior to the Target Price, a Call option is thus said to be In the Money. The same outcome applies if a Put option’s expiry price is lower than the strike price.
For instance, if an investor places a Call option on the EUR/USD pair at the opening rate of 1.3547 and the option’s expiry rate is 1.3548 (1 pip higher), the option is a winning one and the trader wins.
However, if a trader places a Call option on the EUR/USD pair at the opening rate of 1.3576 and the option’s expiry rate is 1.3575 (1 pip lower), the option is Out Of The Money and the initial investment amount is lost.