Binary Options’ Expiry Date Explained

Binary Options’ Expiry Date Explained

Submitted by adil on Mon, 12/01/2014 - 16:20

With the introduction of binary options trading, more and more traders are switching from conventional stock and forex market to binary options market. Unlike the conventional way of trading options where a trader has to invest a large amount of money to manage the risk and find a broker who is willing to purchase these derivatives, anyone can start binary options trading whether he is an experienced trader or a new entrant in the market.

Time is an important factor in binary options trading. The price movement of assets, such as stocks, commodities, and currencies, etc., is not as crucial as placing the time to place the trades, as it is acceptable for a price to fluctuate above or below the strike price in order to be profitable. In a binary options trading, a trader has to be very precise about the time of expiry of trade, and should choose it wisely if they want their trades to end in profit.

How to Select the Time of Expiry

When you trade in the binary options market, the time of expiry changes according to the platform a trader chooses to use for trading, and in accordance with the type of asset he selects for trading. A trader can choose from different expiry periods, but it should be chosen carefully as the failure and success of any trade is based on the time of expiry. Experienced traders always create trading strategies according to the expiry period of trade, and see which strategy will be suitable for a particular time of expiry.

Types of Binary Options Expiry Period

Every binary options trading platform offers different types of expiries to binary options traders, and it varies from one platform to another. A trader can choose any period and can place the trades in accordance with that period. Three commonly used expiry periods of binary options trading are as follows:

• Short term expiry period – This is a most commonly used time period by the binary options traders, and in this case, the expiry period usually falls between 60 seconds to 60 minutes. In case of the short term expiry period, traders prefer to use technical analysis techniques and charts, instead of relying on broad market indicators like the prevailing market events that affect the asset price.
• Medium term expiry period – In this case, binary options contracts expire after several hours. Therefore, when you plan to trade with a medium term expiry period, it is important that you take into account the technical analysis, charts, and also consider the impact of news, current events, and releases on the price of the underlying asset.
• Long term expiry period – The long term expiries usually last from 24 hours to several days, which still is less than the time period taken by traditional trades to expire. They are comparatively less risky than binary options having short term or medium term expiry. When a trader chooses a long term expiry period, it is better to build a trading strategy based on market news and economic events instead of using technical analysis.

Therefore, before selecting any time of expiry for binary options trading, a trader must know why and how a certain time period is suitable for him, and what factors he should consider in order to place profitable trades.