Binary options are one of the most exciting trading alternatives to traditional stocks and forex. Far from the concept of traditional options where investors had to have a large amount of money, and also a willing broker, to be able to purchase options, binary options are highly accessible and easily traded by anyone regardless of market knowledge. Not only do they allow the rapid trading of stocks and currencies but they have also introduced a new element in to trading as well as removing several others. The new element of time means that traders now have to think about when their trades are going to expire rather than simply how profitable the trade will be. Unlike traditional trading, the degree of movement in a stock, currency or commodity is not important and the price can move just fractionally higher or lower than the strike price to be full profitable. However, the introduction of the expiry time of the options has become a critical aspect and one which traders need to adapt to and choose wisely to become profitable.
What is Best and How to Choose Them
When trading binary options, one of the most important criteria that is chosen by the trader is the expiration of the option, or the option’s expiry. In most cases, the expiry times for binary options will generally vary depending upon the trading platform that a trader is using, as well as on the type of underlying asset that is chosen. In any case, however, at the options expiry, the option will become void and it will cease to trade.
Binary options generally have several different expiry alternatives with which to choose – and doing so can make a big difference in whether the trader experiences a profit or a loss. The trading method may also differ according to the options chosen duration. Therefore, it is important to understand how to determine which expiry will work best in various binary option trading situations.
Types of Binary Option Expiries
Most of the online binary options trading websites will allow traders to choose the expiry of their option from a list of various alternatives. It is important to note that not all binary options’ websites will have the same choices available to traders. Typically, however, there are three key types of binary option durations. These include binary options with short-term expirations, binary options with medium-term expirations, and binary options with long-term expirations.
Most of the binary options that are traded each day on the market have short-term expiries. These expiries are oftentimes between 60 minutes for a maximum down to only one minute. In order to trade binary options with shorter expiry terms, traders should not use broad indicators such as current events in analyzing the movement of the underlying asset. Rather, in the case of binary options with a short-term expiry, a trader would be better to rely on technical analysis using charts and/or graphs.
It is important to note that even though binary options with short-term expiries can yield a high amount of profit for a trader, they can also present a great deal more risk than options with longer-term expiries.
Binary options that have a medium-term expiry will typically be active for several hours. When choosing a medium-term for the options expiry, a trader will generally need to consider both real time technical charts as well as external events such as economic news, as both of these can have an effect on how the underlying asset moves and its price at the time of the options expiry.
The expiry time for binary options with a long-term expiration will be in the range of one day up to several days. Traders using these longer terms may not need to rely as much on technical analysis, but rather on economic news and other types of external events that could have an impact on the price of the underlying asset. Although binary options with long-term expiries may not offer as much profit potential as options with shorter-term durations, they also tend to carry less risk.
Prior to entering into any type of binary option trade, individuals should have an understanding of both how and why a particular expiry time is recommended, as well as what types of analysis should be undertaken in order to determine the underlying assets potential up or down price movements.
Many binary options brokers now offer their traders the possibility to close their position early even if has not reached the expiry time or date. This can be particularly helpful if the options are looking increasingly vulnerable with the prospect of them turning from an in the money position to out of the money. Typically, brokers will offer a lower payout for the closing of these options depending where the price is in relation to the strike price and how long is left before the options would have expired.