Expiration Time in Binary Options

Introduction

Expiration time is not complicated to follow and in fact it is one of the simplest things you’ll have to learn as a binary options trader. Basically, the expiration time 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 the type of your binary option broker, you may see different expiration times when placing a trade. After you place your bet and pick the expiration time, the only thing you can do is wait for that time to arrive. When the expiration time comes, the trading platform will assess the value of the asset and determine whether your trade will expire 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.

At this moment, the trader is supposed to predict both the direction of the asset’s 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. Meanwhile, 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 expires, but there are also things such as 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 executing a trade, because making the right choice is very likely to determine whether you trade will be successful or not. 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 their choice of analysis methods.

Example

The best way to explain why you should understand the concept behind expiration time, strike time and strike price is to give you an example. Let’s say that a trader has just placed a put option on the USD/JPY currency pair. The strike time is 13:30, the strike price is 99.147 and the expiration time the trader picked is two hours. This means that the trade will close at exactly 15:29 and the trader will find out if their trade will expire in the money or out of the money. If at 15:29, the price of USD/JPY currency pair is lower than the strike price, then the option will expire in the money and the trader will collect their winnings.