Expiration on binary options
Expiration of options is one of the most important aspects, without which in the options can not be made no deal.
Any transaction in the options market has its time - that is, during the beginning of the option 'period of exercise "and ending" expiration time ".
In fact, during expiration indicates how long after setting the order you expect the results of your transaction.
Once you have bought the option and choose the time after which you would like to deal was closed, you just have to wait until the period expires you selected. After the selected time, you, the broker verifies that the current trading price of the asset to your forecast. In the case of correct prediction, you get a certain percentage of payments in case of incorrect prediction - lose the option to invest in the sum.
A variety of expiration dates equal variety of brokerage firms. In other words, every broker can provide a completely different terms expiration. Some brokers may target over short-term contracts and other trade intra-day, the third choice can provide a longer period of expiration.
Usually expiration dates are as follows: up to a minute - such contracts are called "turbo options" and they appeared on the market recently. These contracts have a huge potential for the benefit of a broker and a huge risk for the trader, because in fact you will trade on the market noise, which, as is known, the forecast is virtually impossible, and such transactions because of its minimum period of a day, you can enter into the tens and even hundreds of (it depends on your luck and the size of your deposit), which of course, to any broker only at hand. His same position on the introduction of this kind of term expiration, brokers explain the supposedly high potential profits for the trader, because of its short-term performance of transactions, while keeping silent about the possible risks when trading the market noise. After all, none of them said that much more logical would be to open a deal with higher investments and for a longer period with the forecast, which can be driven by economic data and the fundamental or even technical analysis than open over short-term transactions relying solely on luck.
Followed contracts for 3 min., 5 min., 10 min., 15 min., 30 min., 60 min., 3 hours, 6 hours and 12 hours, 24 hours, 5 days, 14 days, 30 days, etc. .d. - It is generally accepted terms are present in the majority of brokers. Some individual brokers, these figures may differ slightly.
Reducing the term of expiry or "premature closure" (early closing of the transaction)
In some cases, the trader can take advantage of the early closing of the transaction. This function does not provide all the brokers, the so-called American style option.
Early closing position allows the trader to close the deal before the expiration of the original deadline expiration, while the trader does not get the whole, as part of the profit if the deal was "in the money". For example, if you opened your position and outlook at the moment is justified, but you are not sure whether you have selected the trend continues, you have the right to close the deal early and get a percentage of profits originally stated.
E., If there is not much time before the expiration of the contract, the trend has changed dramatically, and it is likely that the price will go against your prediction and overcome the execution price and the transaction will change to loss-making, the best solution is to close the deal early, while it is in a profitable position and take not all, but part of the profits.
Early closing of the option transaction - it's actually called "redemption option", and allows you to close or complete the transaction until its specified expiration date.
This option is recommended when the trade is unlikely to increase the profitability of the transaction prior to the expiration of the contract, or to prevent a complete loss on the transaction.
Extension of Expiry «Rollover» (Extending)
In addition to the above possibilities prematurely close the position, some brokers allow their clients to postpone the term expiration purchased call option -. Ie, increase the duration of the transaction..
This can be useful in cases such as when the market suddenly there is a rollback rates in the opposite direction from the expected forecast, but a trader exactly sure what the price will go to him in the right direction. In such cases, increasing the life of the transaction, the trader has the ability to roll back to wait and wait for the price trend change in the intended direction.
It is worth noting that often the brokers may charge a fee for the use of such a possibility. However, the income received by a trader with the right prediction, compensates the fee that you give the broker for the use of this option.
Once again, if the transaction is in the "zone of loss" (vs.), but the trader fully confident that his forecast has to be justified and the price of an asset will move in the right direction for him and deal with just about to be completed on initial deadline Expiry - use the option of extending the term of expiry, may avoid loss and bring the transaction to a profit (if the price is really after the extension will go to the right side of the trader).
For example, at the beginning of the trading session you have purchased an option at 12 o'clock on the currency pair EUR / USD based on the economic growth of the euro area, but later came another news, which negatively affected the euro currency and a positive for the dollar in the market there was a momentum against the trend (race price) and your initial prognosis is now proved wrong. Naturally, this is not included in your plans and everything goes to the fact that the option you purchased, cause damage, and meanwhile the option is nearing completion. In this case, if you are sure that this is a temporary phenomenon and the price will continue to move along the main trend, you make the decision to extend the option.
As a result, after a temporary movement against your forecast, the euro / dollar has won back all the lost positions and again started to move in the main trend and the decision to extend the expiry fully justified itself and bring you profit.
For example, all may seem simple enough, but do not deceive ourselves, and to use a method of extending the option permanently for no apparent justification. Do not forget that for the extension of the expiration of the broker will charge a fee, so in some cases, if your prediction was wrong initially, it is sometimes better to fix the loss, than unnecessarily risking even a part of its capital.
It should be noted that the function extension and option has some limitations:
Use the extension option is possible only in the event that remains at least 5 minutes (different brokers this time may vary) the option to end expiration.
· Function application extension option for one contract, only be used once.
· Extending tool can not be used for transactions with a time period of less than 15 minutes (with different brokers, this time can vary).
The term of expiration and the trader's strategy
One of the most important moments in options trading is undoubtedly a properly selected period expiration. In options trading, not only has the value of a correct forecast price direction, as well, is crucial choice of option expiration time is incorrectly selected expiration date of the option often leads to a losing trade.
Expiration of options is one of the most important components that should be taken into account every trader in the implementation of their trading strategy.
Unfortunately, the question "What is the ideal time of expiry?" - You will not find a clear and unequivocal answer as the ideal time of expiration simply does not and can not be. Picked term expiration depends on many factors, for example, it must be remembered that each individual asset needs an individual approach, because volatility and asset habits are totally different. You simply can not effectively use the same term for two entirely different assets. Also, consider the economic data for a particular asset.
On your decision depends the result of each of your transactions, so the importance of the life of the transaction can not be underestimated.
First of all, you must decide your trading strategy will be based on what basis. Either it will be a selection of a statistical life expiration or dynamic.
Strategy for statistical timing expiry - this is when you pick up for themselves the most appropriate term expiration (permanent), which will be taken as the basis of your strategy, and then wait for the most favorable moments in the market to enter into a transaction on your chosen date. In other words you do not adapt to a market, and are biding for a chance for a deal when the market will meet your requirements for the transaction. The statistical term expiration, a constant, always one and the same period of time that you are using in their transactions.
Strategy on dynamic expiration dates - in this case you do not biding for the right moment for the transaction under certain expiry time, and pick exactly the term of expiration at the market. Those. choose the most attractive asset for you, and already on the basis of the analysis pick a necessary set a deadline for the expiration of the asset. In other words, you do not wait, when the market will meet your interests and yourself to adjust to the market. The dynamic period expiration is not the same (as a statistic), and can always be different.
How to choose a term expiry
In binary options trading, as the expiration time (in addition to the "statistical" and "Dynamic"), the strategy can be divided into the following types:
- Beyond the short-term - Options traded an inside day, the duration of the lifetime of the option is up to 24 hours. Predict price movement of this period is extremely problematic. For a trader it is very important to complete all transactions before the end of the trading day. Why before the end of the day? News economic factors completing its working phase, the market goes into a so-called "stagnation" mode.
- Short - options traded within week period, the time duration of the option life of about 1 day to 1 week. Most of these traders are trying to close the order until the end of the last day of the week, such options to predict more easily than in the previous example, because this forecast period may already be based on the economic components (news). But still, in trade, traders often use technical analysis. Typically, the trader selects a term expiration 1-5 days, while always trying to complete the deal until Friday evening because Forex market is closed for the weekend. During the weekend the market may change dramatically, and can begin to move in a completely opposite direction, and at the time of expiry Expiry cross strike price in the objectionable side trader thereby bringing losses.
- Medium - options traded in the period lasting from one week to one month. external economic factors that influence the price movement is most often considered for the forecast. In this case, many traders may rely on the economic calendar, taking into account the most important in the union with a certain sequence of positive news for an asset. Those. If within a week, or more, for a specific asset out only positive news in the sequence, it is a good sign for further medium-term growth prospects of the asset. because random negative news is unable to interrupt the positive momentum and expand the market trend. Even if there will be a correction, the market is more likely to return to the main trend on the background of a series of positive news.
- Long - options traded in the period lasting from one month to a year, and sometimes more. Such kind of trade is more suitable term "investment". Advanced traders often use the medium and long term options as a hedge.
If you decide to become a trader options market, in any case, I do not advise to choose the trade options with a term of expiration of 60 seconds (turbo options). Get a steady income with an interval of "life transaction" option is almost impossible. Stable profit from such trade can only receive broker. The fact that trade itself in this case is identical to the conventional roulette in a casino, and it is from here are born such rumors that binary options, it's a casino. In most cases, the traders "merge" your deposit here. Working with intervals of 60 seconds is more like a game of chance at the roulette table, t. To. On these periods the market a lot of noise because of what the forecast price movements are not possible. Such trade attracts more and more newcomers who often want to count on a quick profit. Just attracts gamblers who literally came just for a dose of adrenaline, not for profit. Due to the complexity of such a trade, or even, I would say it is impossible, novice option traders is recommended to select a longer period of expiration.
Experienced traders to trade options contracts are advised to start familiarizing with a longer period of expiration. Keep in mind that the smaller the expiration of the term - the higher the risk, because your prediction is not supported by anything and at such periods prevailing market noise, the greater the period of expiration - the lower the risk, because your forecast may be based on the fundamental and economic factors. Choosing long-term options, it is logical to rely on economic news, and other external events, which in some way may affect the assets of the quotes.
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