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Understanding Expiration Times

Learning binary options involves understanding the basic terms involved in this type of trading. The term expiration time, or time frame, is a vital component of trading binary options.

Risk Warning – “Investors can lose all their capital by trading binary options”

Trading binary options is a type of investment using specific underlying assets. Traders make predictions at the possible direction of movement of that asset’s value within a fixed time frame. This time frame is called the expiration time. If you are a total newbie start here.

Basic Explanation of Expiration Time

Expiration time is simply the end time limit used when deciding if an asset price is above or below the original strike price. This decides whether the trader wins or loses their investment. Expiration times are crucial in determining the investor’s returns. Occasionally, a trader may receive a small part of his investment even if he loses, but this type of guaranteed return is rare. Binary options are completely dependent on the basics of expiration times/dates. There is the added advantage here that traders are able to select expiration times for their options, obviously within the boundaries set by available assets and the broker offering them.

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Expiration Category One

Binary options can be placed into three main categories. The first category has the shortest or fastest expiration time. These options typically expire within minutes, or occasionally up to an hour. While they carry a high chance of profit, they also carry the highest risks. As a result, these fast options are usually played by only the most experienced traders.

Expiration Category Two

The second category consist of binary options with expiration times of several hours. By carefully researching real time charts and economic publications, traders can usually place fairly safe trades in this category. With the slightly reduced risk, however, also come slightly lower profits. Your money will also be tied up for longer periods of time.

Expiration Category Three

The final expiration category consists of binary options that will not expire for several days, sometimes weeks. As a rule, the longest expiration time is usually a month. The risk involved here is clearly lower still, as are the possible profits. This is an option normally selected by novices, as it is often easier to predict – obviously following careful study of technical charts and other publications – which way an asset will move over a prolonged period of time.

Fast Pace Trading

Most binary options are fast paced. The returns are usually very good, with a great deal of brokers offering between 70 and 80 percent returns on winning trades. The fast pace at which binary options are traded, sometimes with expiration times of as little as sixty seconds, makes this far more exciting than traditional active trading methods.

The best time to trade in binary options ultimately depends on the trader’s experience. For a seasoned trader, the faster options are more attractive, because they obviously offer the opportunity to make the highest profits with their money being tied up for shorter periods of time. Beginners are able to learn binary options by going with the options carrying longer expiration dates using a demo account, as this will reduce their risk of losing.

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