All about Expiration Times in Binary Options Trading

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Expiry Time Types for Binary Options

Attitude is clearly one thing that every binary options trader must consider in performing trades. The attention that should be given to market sentiment varies from asset to asset, and trading instrument being utilized. There are many factors that weigh in the decisions that binary options traders make that pertain to the marketplace. Expiration time is most definitely a factor that will have a big effect on binary options trading. Subsequently, trading must not be based completely upon numbers, as binary options traders need to have a feel of the market, and himself, to make the right choice.

Many binary options traders make use of different expiry times as part of their strategy. Binary options brokers offer a variety of expiry times, from as short as 60 seconds, to as long as a weekend trade. The difference of these expiry times play a significant role in the amount of profit that a binary options trader can obtain, and the amount of investment and risk involved. When traders opt for longer expiry times, the returns can be more profitable, but the risks are also greater.

It is important to choose expiry times carefully. Most binary options traders, especially those who are new to trading, choose expiry times arbitrarily. However, as they get the hand of trading binary options, they soon learn the importance of choosing the right expiry time for their investment, in accordance to their trading styles. Those who want to feel the rush of earning huge amounts of profits in a short span of time choose shorter expiry times, but their risks are also increased by some factor.

Knowing when to post a trade and what time to choose is something that a trader learns over time. Binary options brokers offer a variety of charting tools that allow the trader to make informed decisions and make significant profit. We are dedicated to helping you.

Expiry Time Divisions

New binary options traders often ask “What specific chart timeframe should I be focusing on?”. There are different expiry times provided by different binary options brokers. Here are some of the most popular times included in many platforms.

  • 60 secs
  • 2 mins
  • 5 mins
  • 15 mins
  • 30 mins
  • 1 hr
  • end of day
  • 1 week
  • 1 month

It should be noted that lockout periods range between as low as 2 or 3 minutes up to 15 minutes depending on the asset choice and the type of trade. A binary options trader may be trading 30 minute expiries, but the lockout is 5 minutes, so the trader is actually trading in a 5-minute trade, not a 30 minute trade.

When entering trades with short expiry times, the binary options trader needs to research marketplace sentiment very carefully. One situation for a short time period may be when marketplace conditions are optimistic, or perhaps pessimistic. Binary options expiration times may be as short as one minute. It should be worth noting that this is probably not enough time for a significant changes in price values to happen. Nevertheless, whenever making use of shorter expiry times, it is important to know the returns and risks that go with it,

Expiry times that last anywhere from one day to a week, or longer will demand a different kind of attention from the trends in the market. When trading binary options using these expiration times, the primary focus must consider all market trends within the past few weeks. As with any perception on expiry times and other binary options factors, there are no guarantees that reversals won’t happen prior to the expiration time. However, it should be deemed useful to see if marketplace conditions have persisted in being either bullish or bearish within a considerable time period, as this is viewed as a very robust signal.

Viewing Charts for Expiry Times

The charts you use in different binary options platform should adhere to the expiry times that you chose to trade in. Experience binary options traders use two (2) chart timeframes lower than the expiry time. The reason behind it is this: One timeframe lower than your expiry allows you to see the current price and how far away the expiry is. It therefore helps you to determine how much leeway your trade has before expiry. Using two timeframes lower than your expiry will give you the precision and accuracy on the trade entry, increasing your leeway.

For example, a binary options trader trades 15 or 30 minute expiries. For the 15 minute expiries, the trader uses 1 or 5 minute chart timeframes, and 5-minute or 15-minute chart timeframes for the 30 minute expiry.

Zooming Out

As a general rule, when binary options traders are in doubt, zooming out gives that trader the bigger picture. More often than that, binary options brokers’ charts are zoomed in too closely. Focusing only on the past couple of hours of data is a common mistake that binary options traders do. This could be analogized to a horse with blinders who is only able to see a limited view of the current price trends, instead of looking into a bigger picture.

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There are reasons for the binary options trader to zoom out. The price range and times from a view gives a clearer perspective of trends and other underlying factors that affect asset price. With this in mind, it is advised to zoom as far as the last point where candles still look like candles instead of bars in a bar chart. Alternatively, a binary options trader could also switch to a higher time frame, although this will entail an entirely different stratagem for the trader.

Example of a 30-minute Expiry Time

Below is an excerpt of a EUR/USD price chart.

The blue lines represent 30-minute expiries. The whole excerpt therefore represents 5 hours of trading. 5 hours could be a decent amount of time to look into. However, it is not a great view for longer trading times such as trades. This chart therefore is good for the 15 minute expiry or the 30 minute expiry.

If you enter somewhere in the region of the black dot, you would know how much time left before expiry (30 minutes). In the region of our example, it can be seen that there is a downtrend for the specific 30-minute interval, and the binary options trader can act accordingly. As we can see, this chart is ranging. But the question is, how much is the price ranging relative to the day’s action? Zooming out once can answer our question.

The price range of our 30-minute intervals relative to the previous ranges shows us that the previous view is not representative of trends for longer trading times. Zooming out again shows us a bigger picture, where we can see now that our previous price ranges is relatively steady compare to longer expiry times. Our 30-minute changes are relatively small compared to the big downtrends seen on the left.

This teaches binary options traders that they should not trade like horses with blinders. Knowing the general trends of the asset you are trading gives you the edge to make more informed predictions, which will lead to more successful trades, greater profit, and less risks.

Let us provide you with more useful insights like these in our succeeding articles. Stay tuned. In the meantime, why don’t you check out our list of recommended brokers, and see which ones you are most comfortable with to start trading.

Choose the Right Binary Option Expiration Period

There are many benefits to binary options trading over traditional stocks or Forex trading. Binary options are unrivaled in their simplicity. They are easy to understand and execute, even for beginners. Some types of options even provide you with amazing opportunities you will find nowhere else. With Range trades for example, you can make money in flat markets.

But one area where binary options are not superior to traditional forms of trading is where expiry periods are concerned. This is something you will figure out quickly when you start trading. You are given a finite selection of trade opportunities and expiry periods. If you pick the wrong expiry time, even with a great trade setup, you will lose.

So, how do you choose the best expiration period for your trades? That is the subject we will explore in this article. But first, I will go over expiry basics with you just in case you are a complete newbie.

What Is a Binary Options Expiration Period?

Let’s take an example of a standard High/Low trade. With a High/Low trade, you are essentially being asked a question about a financial asset, which could be a commodity, currency, stock, or index. Let’s say the asset is GBP/JPY.

At (expiry time), will the price of GBP/JPY be higher or lower than (price)?

You answer that question by choosing High or Low (sometimes termed Call or Put).

If when the trade expires you were correct, and the asset is priced as you anticipated, you would win. Otherwise, you would lose.

So, if you picked High for GBP/JPY, and GBP/JPY was trading above the specified price when the trade expired, you would win. If it was trading below it, you would lose your investment.

How Is This Different from Traditional Forms of Trading?

Let’s consider how Forex works. Imagine we are again talking about GBP/JPY, and you still have reason to believe that its price is going to rise.

With a regular FX trade, you would use a market order to buy immediately, or a limit order to buy when price hits a certain level. You would then be in the trade.

You can then sit around in front of your computer and exit the trade manually whenever you want, or you can set up a and walk away to exit automatically at a certain level.

Limitations of Binary Trading Expiry Times

You should now start to see why the expiry time system used in binary trading is restrictive. With traditional forms of trading, you can exit your trade whenever you want. That means you can be entirely strategic about it. If necessary, you can do it on the spot.

But with binary options trading, that is not always possible. The expiry time you picked at the start of the trade is the one you are stuck with (there are some exceptions — see the section on early close below).

This can make it a challenge to profit for multiple reasons.

  • First of all, unless you are trading on an exchange, the broker is taking the opposite side of every trade you make. You are playing against the house. It is therefore not in your broker’s interest that you win. So, the entries and expiry times (exits) offered to you will play in your broker’s favor, not yours.
  • Some systems are reliant upon highly specific exit strategies. You may have a great system which is impossible to put into practice because none of the expiry times offered are a fit for the exit strategies you need to adopt to be profitable.
  • There are also systems that depend on your ability to close out your trades at a moment’s notice. If you cannot exercise this control, you cannot profit.
  • Backtesting can be confusing. After all, while you are testing trade ideas on historical charts, you have no way to know what expiry times would have been offered to you. So, you cannot say with certainty whether your system will work in real life.

So how can you tackle these choices and choose profitable expiry times? Following are four suggestions.

Start by Developing a Strategy

No matter what, the first thing you need is some kind of strategy to trade with. You need a system which gives you entry rules. With traditional FX, it could be said that your system needs to include exit rules as well, but as you do not have total control over your exit strategy with binary options, let’s say exit guidelines.

Taking an example, let’s say you are going with price action, and you will be trading pinbars and inside bars. You must start by learning how to recognize those formations. Then you need to come up with a rule for how and when you will enter trades.

Pick Expiry Times Appropriate for Your Timeframe

The next recommendation is that you go through and backtest your strategy as you would trade it for traditional FX. Go through old charts and note down trade entries you would take as well as the exits you would ideally make. If the results are profitable, you have a system that may potentially work for binary options as well.

Now you should have a pretty good idea what an ideal expiry time looks like for your typical trade. If you have a broker that allows you to set customized expiry times, use what you have learned to do so. Just think of it like setting a .

Most binary brokers do not allow this however. They will only offer you a certain selection of expiry times. It is up to you to pick the best one — or skip the trade. For example, the screenshot below (from IQ Option platform) demonstrates that the range of expiry periods is quite limited even with brokers that offer a rather flexible choice:

If there is an expiry time available near where you would set a , that is a great choice, and you should go with it.

If there is not one, think about timeframes. Is there an expiry time which may still be appropriate given your trade?

If you have been testing price action strategies on the 1-hour chart, for example, and most of your profitable trades during testing spanned several hours or longer, it makes no sense to pick an expiry time 20 minutes in the future, or several months from now. But if there is something within a few hours, that may be a viable choice.

Likewise, if you are a position trader banking on some kind of political event, it would make zero sense to pick an expiration period which is just a few hours or days ahead.

And if you are using a strategy for scalping, an expiry time of even 10 or 20 minutes might be too much. You may do better with 60-second trades.

A quick note about 60-second trades: If you can profit off of them, by all means, do so. But if you are a newbie, it is important to recognize that this timeframe is incredibly volatile.

So, if you are still in the stages of choosing a strategy, go with one that will naturally steer you in the direction of longer expiration periods. You will be dealing with less volatility. Less volatility means less uncertainty, which in turn means a reduction in risk.

Definitely Do Some Demo Testing

The next tip for choosing appropriate expiration periods is to make sure that you demo test before you go live. As was mentioned before, there are some questions about exiting trades which you cannot reliably answer while backtesting.

But with demo testing, you can find out whether your strategies will work in real life with data and trade opportunities.

Once you do start demo testing, you may discover one of several things.

Either your trades will work out as planned, because the expiry times you need are readily available…

Your plan will not work out at all, because the expiry periods you need are rarely or never available…

Your system will sort ofwork. The expiry times may not always be ideal, but you may discover with some tweaking that you can get the results you need.

You cannot overestimate the importance of this step. There is no other way for you to know whether the system you came up with during backtesting is viable when traded live with real money.

Use Early Close

One of the more insightful conversations I ever had with a binary options broker concerned the early close feature which some websites offer.

Early close allows you to exit a binary options trade you are in before it expires.

Different sites have different restrictions on this tool. A few sites allow you to use early close anytime. But most have some kind of limitations on it. For example:

  • You might only be able to early close while you are profitable (for a partial profit).
  • You might only be able to early close while you are unprofitable (for a partial loss).
  • You might not be able to exit a trade during the last 5 minutes before it expires (or some other length of time).

You will need to check your broker’s resources to find out how early close works on your trading site.

Coming back to the conversation I mentioned, the owner of a binary site once told me that the single biggest mistake that traders on her site made was not using the early close feature.

She told me the vast majority of her customers were losing money, and the few that were profitable made great use of early close to minimize and avoid losses.

So, if it makes sense with your exit strategy, do make use of this tool. Since you cannot customize your expiry times on most binary sites, early close is often indispensable when it comes to getting the exit time you need.

There is also a tool called rollover to extend a trade past the expiry time, but be advised to approach it with caution. Usually you are asked to increase your stake in order to extend your expiration time.

Conclusion

Exiting trades profitably with binary options is a challenge compared to the traditional forms of trading, but definitely not impossible. Now you know all about how expiry times work in binary options trading, and you are familiar with the obstacles involved with choosing profitable expiration periods. But with some testing and creativity, you should be able to pick binary options expiry periods that work for you.

Expiration Time in Binary Options

You will learn about the following concepts

  • What is expiration time
  • Strike time
  • Strike price
  • Expiry time alternatives
  • Expiry time extension
  • Early trade close
  • Double Up
  • Example

Expiration time

Expiration time marks the moment when the binary option expires. It basically determines how long after you’ve placed the trade, you’ll learn the outcome of your bet. Depending on the type of binary options you are trading and, of course, the type of your binary option broker, you may see different expiration times when placing a trade. After you have placed your bet and picked the expiration time, the only thing you can do is to wait for that time to come. When the option expires, the trading platform will assess the value of the asset and determine whether your position is in or out of the money.

Strike Time, Strike Price and Expiry Time Alternatives

There are several other terms that are closely related to expiration time. For example, when a trader places a bet, the hour at which the trade was placed is often referred to as strike time. The exact price of the asset at the execution time of a certain trade is called strike price.

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At this moment, the trader is supposed to predict both the direction of the assets price and pick the expiration time. For example, if the trader thinks that the asset’s price will rise, then they have to select the Call option. Conversely, if they think the price will go down, then they have to execute a put option.

Don’t forget that your broker may offer different expiry times for different types of assets. In most cases brokers will give you the opportunity to choose between hourly, daily and weekly expiry, but some brokers also offer 60-second options which allow you to quickly execute trades with an expiration time of just one minute.

Expiry time is one of the most important aspects of trade execution. The larger the expiration time, the more likely it is for the asset’s price to drastically change under the influence of market changes. Of course, this doesn’t necessarily mean that shorter expiration times are preferred – this entirely depends on the trader’s trading style and and his/her choice of analysis methods.

Trade extension

Some brokers allow you to extend your expiry time, also known as “rollover”, which is useful when you see that the underlying assets price is moving in the desired direction, but not fast enough, or it is not going well at all. This option will give your position a fighting chance to become “in the money”.

However, you will have a limited time to do so. Brokers typically open up a window lasting around 3-5 minutes to exercise this feature, which is usually shortly before the option expires. Also, you are typically allowed to extend your option only once for its entire duration.

Early trade close

Opposite to the expiry time extension, some brokers provide you with the opportunity to close your trade earlier than originally planned. Traders usually use this option when their trade is profitable and they are unsure whether it will remain like that. However, just like the trade extension, it comes with a limited time window – it becomes available 15 minutes before the expiry and lasts for 10 minutes. Also, brokers tend to charge a premium for this option which can amount to as much as 50% of the original payout.

Double up

Some brokers allow you to double your bet, in case you are feeling confident enough. The double-up option doubles your investment while keeping your current expiry time and direction. However, the entry rate will be updated to the current rate at the time the Double Up option was exercised. In exchange for our increased investment, we will logically receive the same rate of increase in profit, given the option becomes “in the money”.

Even if you choose not to use these options (rollover, early close and double up), all of them expand the range of trading decisions you can make and, thus, allow for more customization of your trading strategy. That is always a good thing.

Example

Let’s say that a trader has just bought a put option on the USD/JPY currency pair. The strike time is 13:30, the strike price is 99.15 and the expiration time the trader picked is two hours. This means that the trade will close at exactly 15:30 and the trader will find out if their trade will expire in-the-money or out-of-the money. If at 15:30 the price of USD/JPY is lower than the strike price, then the option will expire in the money and the trader will collect his/her winnings. Conversely, if the price is higher than 99.15, say 99.25, then the option will be out-of-the-money and the trader will lose the capital he had wagered.

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