The nature of Binary Options Trading: Binary Options Trading takes a less cluttered approach to trading popular assets like stocks and currency pairs. Although there are different trade types, the rules are simple for each.
For high/low options for example, the rule is to make correctly predict the future movement of an asset relative to the price at which you take a position, at the expiry of a set timeframe. With this Binary Options trade type, it does not matter how long your hold the position nor the number of times the asset price moves in opposing directions. The emphasis is on: When the timeframe expired, was the price of the asset higher or lower compared to the base price?
On the other hand, for the touch and boundary options, the rule is similarly simple. A trader predicts that the price of an asset will reach a certain price point within a certain timeframe. With this options type, it doesn’t matter how many times the price nearly hit the predicted price point, nor does it matter how many times the price hit the predicted price point, nor what happened to the price after it had hit the price point. The emphasis is on; did the asset price reach the predicted price point at least once before the position expired?
Glaringly, one factor is common between both common Binary Options types—TIME.
What is Expiration in Binary Options?
Expiration is the concept that describes the termination of the terms of a contract or position after a set time has elapsed.
What are the Expiry Times in Binary Options?
Because of the fast-paced nature of Binary Options, expiry times are generally short. They may be as short as 30 seconds or as high as a whole day. However, the expiry times offered differs across brokers.
This notwithstanding, most brokers offer the following expiry times after which expiration occurs, 60 seconds, 5 minutes, 15 minutes, and 30 minutes. Different brokers offer variety in the form of non-standard expiry times like 30 seconds, 120 seconds, 60 minutes (1 hour) et cetera.
Which Expiry Times should you use?
The three core reasons that determine which expiry time you use are:
- Option Type ( for example, high/low or touch option)
Making an Early Exit before Expiration in Binary Options
Binary Options brokers are increasingly supporting the feature that permits traders to exit a trade (close a position) before expiration. This action is referred to as closing early, and may be brought about by using “Close Now” tool in a broker’s summarily list of platform tool.
This feature is vital to traders, especially when the outlook is poor. The requirements and nature of this feature differs across brokers. Notably, the payout is affected as brokers usually offer lower payouts or worse zero payout for closing early depending on the amount time left to expiration and the relationship between the current price and strike price.