Good time days! Today I have an extremely IMPORTANT and Interesting topic... So they pricked up their ears - or rather, their eyes - and went to figure it out ...
Options have a large number of different characteristic parameters, which include PRICE. The method for assessing it is rather complicated.
EXPIRATION OF OPTIONS - this is what you should pay special attention to!
There are complex formulas that are used to calculate these metrics. Assessment methods can be called conditional, but they are still important for understanding the main trends.
It is desirable for traders to know the main points, the nuances of pricing, changes under the influence of various factors, and so on. The price is influenced by the intrinsic and time value.
These two factors represent the main components of cost. This will make it easier to understand that the option price is a special value.
What I'm talking about today:
Time value of an option
So, let's talk about time value first.
This concept represents the cost of the probability that an option is able to give over a certain period. How large quantity time will remain until the expiration of the contract, the more expensive the option will be, even in the absence of value internal type.
For example, an option issued in March is likely to be cheaper than an option issued in June, even with the same strike rates. Obviously, the chances of closing with a profit for a summer option will be slightly higher than for a spring option. For this reason, the cost can vary significantly.
Every option has a loss in time value.
This will be especially noticeable when examining an option chart where there is no intrinsic value. Such charts can be found without problems on the working platforms of many brokers, on specialized resources on which visual aids, teaching materials and everything else.
Intrinsic value of an option
Let's not ignore the intrinsic value!
It represents the amount the trader receives if executed. If this CALL, then the parameter will be equal to the difference between the value of the key asset and the amount of execution. For PUT it represents the difference between the performance and the price of the key asset.
There is one very curious pattern that can be traced in a decrease in the time value when the moment of contract execution approaches. But this is also observed during the increase in such a contract value.
For the buyer, a more profitable purchase would be a contract with a negligible intrinsic value than an option deep in the money. For this reason, the time value will steadily decrease with the general price increase.
Also, the cost is directly influenced by VOLATITY. The higher its indicator, the more significant the change in the price of the main asset will be. The option from this will be sold at a higher price.
More in a simple way earnings will be the use of an underlying asset that exhibits a strong degree of volatility over a short period of time, in contrast to assets with insignificant price fluctuations.
Option agreement
How is a trade made?
This contract format has unique nuances and features. Most often, the contract provides for the obligations of the parties and certain rights. This can be, for example, an obligation to pay Money when taking into account price changes for the underlying asset.
There are elements of obligation regarding the sale or purchase. valuable papers, goods, currency and everything else.
An option agreement imposes some obligations on both parties. There is also an option to conclude contracts, which have their own details.
In a specific case, the party provides another opportunity to conclude an agreement for specific conditions specified by the option itself. There may also be an emphasis on the occurrence of certain conditions only in the case of the will of a particular party.
The contract contains certain conditions, which make it possible to clearly define the subject and its other significant details. The subject can be described in virtually any of the currently existing ways. The rights to an option can be assigned to third parties, unless otherwise stipulated initially.
Option agreement and option to conclude an agreement
At the time of the conclusion of the contract in the form of a basic subject is right to confinement itself... An option in a specific case is a special kind of agreement on the sale of rights to conclude a specific contract.
OPTIONAL CONTRACT is a slightly different concept. V in this case it may be a contract that spells out the details of the execution delay until the moment when certain circumstances arise or the execution itself is requested.
In general, the key difference between these concepts is the fact that an option can acquire a specific right to conclude a transaction, and in other cases, demand rights are obtained under an agreement that was concluded earlier. But always, in the form of a key economic object, certain conditions of a contractual type appear.
If both parties are initially set to interact with each other, they can do without the option. In this case, it will be somewhat easier to discuss the basic conditions in advance, to prepare everything for execution. There are many nuances and interesting questions.
It should be understood that an agreement to grant an option is not a relevant agreement. This is due to the fact that there are no specific actions required from the issuer. The option is provided here automatically.
This suggests that the right to sign the contract appears at the immediate moment of signing the agreement. The granting of an option is not considered exercise by an agreement to grant the option itself, because it is not required by the exercise.
A provision agreement can be structured as a dedicated contract. Both parties in a particular case have the right to postpone the occurrence to conclusion.
Option cost and its main nuances
Above, I have already spoken about the division of types of value for a specific option. There, intrinsic and temporary values are used, which are characterized by unique features. Internal assumes the amount that the option owner can receive if there is no change in price before expiration ends.
PERFORMANCE PRICE is a very important nuance... It is also called a strike. It is established directly in the contract under which the purchase or sale of the underlying asset is carried out.
An option, the intrinsic value of which is positive, is usually called “in the money”. The rest have an internal price of zero.
For example, someone has a stock option on a popular company. Their strike price is sixty dollars. In this case, the indicators of the current market value are equal to sixty two dollars. That is, the option belongs to the “in-the-money” category.
As an owner, you can buy shares at the stated price and sell them at a higher price. This format of options is most often among the most actively used on modern market... They become especially popular when the expiration date approaches.
If the fair value is lower than the strike value for a call or higher for a put, then the option will be called out of the money. There are several other classifications that are actively used to define features today.
Essentially, the intrinsic value is equal to the premium minus intrinsic value.
Options expiration time
This indicator is extremely important for any trader. The importance of this skill cannot be underestimated. In the end, the result of a completed transaction may depend on what decision will be made.
Those who wish to successfully trade options should take into account such points!
The choice of the duration of the period depends on various factors, including the frequency of trading, as well as the specific strategy. It is necessary to take into account the peculiarities of forecasting price movements in order to find the optimal time frame.
To make the right choice, you need:
- Analyze the current situation.
- Estimate the potential value of a specific asset.
- Weigh all the nuances.
EXPIRATION represents the expiration of the contract. We can say that it is the time at the end of which the main condition of the binary option is satisfied.
After the expiration time, the moment of expiration is determined. Currently, you can use a wide variety of terms, which depends on the specific broker, his working conditions and many other factors.
Not every broker gives the opportunity to make adjustments in the time frame after the immediate completion of the transaction. When the period expires, the trading platform checks that the price of a particular asset matches the conditions that were agreed in advance.
- If the outcome turns out to be positive, the trader makes a certain profit.
- If the conditions are not met, the investment is lost.
The main types of expiration
And what kind of expiration can there be? I will tell you about several types of it.
Modern broker companies try to offer extensive opportunities for users, which also applies to such terms. They can be very short and very long.
Differences can be extremely important in this case, because they often have a direct impact on profit margins. For this reason, the approach must be as responsible and careful as possible.
As a rule, novice users do not pay enough attention this moment, do everything arbitrarily. Any option and option agreement can turn out to be profitable, given all the nuances, including a competent choice of expiration dates.
If the user has doubts about the choice of the term, it is better to give preference to the longer one. This will give you a better view of the big picture. It's best not to focus solely on the latest data.
Due to the limitations, you may not know the features of the trend, its origin and other similar factors that can affect the formation of asset value.
There is a type of intraday trading. Typically only a few hours a day are spent on this trade. Here are used unique features analysis. It should be understood that increased risks are typical for short terms.
This is especially true for very short periods of minutes or hours. This option will be optimal for risk lovers who are not afraid. Beginners often want significant and quick result.
Therefore, they pay attention to the potential indicators of the profitability of these transactions. But most often this is the cause of losses. Time value of an option may turn out to be another component that is taken into account when choosing an expiration.
Expiration dependence on a specific type of option
There are several main categories of options that differ in terms of expiration time.
They have their own pros and cons. Among them it is worth noting:
- Ultrashort that last less than a day. Here it is better to choose a period of no more than one hour. This will allow for a short time period to give an adequate assessment of a specific strategy. The main difficulty lies in forecasting price movements with a limited amount of data.
- Short term characterized by a duration of 1-7 days. The user should, in the best case, close the deal before the weekend. The changes that may occur during this time are very difficult to predict. Therefore, if the option is to be bought for five days, the best time for this will be Monday morning.
- Medium-term can last from 7 to 30 days. Here you need to understand the basic factors of the market, analyze information from various sources.
How to choose the optimal term for options? You just need to take into account all of the above nuances.
Therefore, learn the materiel, comrades, read my articles carefully and do not be afraid to try BO trading in practice. I believe that you will succeed!
Greetings to all trading lovers. Today we will sort it out with you very important topic in the context of the market binary options- what is expiration time? I would like to note in advance that this issue is incredibly important and without a competent choice of the expiration time it is impossible to trade successfully on the market.
It is generally accepted that the field of binary options is much simpler, but even in this area there are vital points that cannot be avoided. Without false modesty, I can say that the expiration time and its choice is just such a moment.
Many traders seem to have an interesting and promising system, but the wrong choice of expiration completely destroys the entire potential of the trading system.
What is the optimal expiration time for binary options?
If we talk simple language, then the expiration time represents the expiration period of the contract. That is, this is the time after which, depending on the type of the contract, the current transaction in the market should be closed.
In general, the expiration time can vary, from a few ticks up to a year. Naturally, much here will depend specifically on your trading system. If you are used to trading more conservatively, then the expiration time will be appropriate.
That is, if you are used to investing your funds, then the expiration time should obviously be from one to several months.
If you are trading intraday, then the option time here will be limited to a few hours.
There are also very aggressive traders who trade at very low intervals. In this case, the trade can only be active for a few minutes. Again, everything will depend on you, your system, and your preferences.
What expiration time should I choose?
To begin with, I would like to note that novice traders, who have been exposed to excitement and thirst for quick profit, use short-term options with an expiration time of no more than 5 minutes. What can be said here?
This approach is more like some kind of stupid and incomprehensible roulette. Yes, a trader can certain time take it, and its deposit will grow at a steady pace.
But the moment will surely come when the series of profits will be replaced by losses.
Experienced traders never trade at such extremely low expiration times. They are well aware that this approach will do nothing in the long run. They recommend that you enter options for at least 15 minutes. Moreover, ideally, consider the expiration date of the option from an hour or more!
What is the ideal expiration time? Unfortunately, there is no clear and affirmative answer to this question, since there is simply no ideal expiration time and cannot be.
The market is highly volatile, and no one can know in advance where and how the price will go. All our actions in the financial market are reduced to banal forecasting. You will have to choose the expiration time yourself, that is, by a purely trial and error method, you will have to independently calculate the execution time that suits you specifically.
Watch
There is simply no other way, so choose trading system, open a demo account and select, experiment. I want to point out one important point, the chosen time of performance should be emotionally suitable for you.
That is, if you opened an option and every two minutes look into the terminal, hypnotizing the price, then it means that you are using the expiration time uncomfortable for you, and it makes sense to experiment further.
Over time, you can choose for yourself the right time execution. But I can give you a couple of tips! For example, if your trading strategy is trending, then it makes sense to increase the expiration time. What for?
The point is that the price can long time hang out in one place, and if the expiration time was chosen illiterately, then, naturally, the option will close with a loss, and may immediately move towards your original order, but you will already be out of the market.
That is, it turns out that you have clearly defined the direction of the market, but with the expiration time you have not guessed, and in the end you will get a loss. I would like to note that the expiration time and the correct choice of it are a priority for you! It is on this that the fact will directly depend on whether you can trade options profitably.
There are no trifles in binary options trading. For successful trading there are many factors to consider. Of course, market analysis and strategy are important. But it is also worthwhile to correctly determine the expiration period, since the final result often depends on this.
If you are just starting to learn the basics of binary options and you still don’t know what expiration is, do not skip the next paragraph.
In fact, there is nothing terrible and complicated in this term. Expiration is the expiration of a contract earlier than the specified term. Upon its expiration, or during (depending on the type of option), the trader makes a profit if the agreed conditions are met. Or loses investment if the forecast is wrong.
What expirations can I trade in binary options?
Before determining which expiration time is right for you, you should figure out what options are generally available in terms of transaction time.
Turbo options
Options are quite popular among beginners, as they allow you to make a profit every 60 seconds. However, experienced traders try to bypass them for the reason that trading at such an expiration is practically unpredictable and the risks increase several times. But it is possible to trade turbo options with constant profit, but only a few do it. Such speculators are called scalpers, and their trading strategy is "Scalping", which may require a lot of knowledge and experience to master.
Short-term options
These options surpass all other types in popularity. Trading from 5 minutes to 2-3 hours is common among traders of all levels. There are several reasons for this:
- This expiration period allows you to conduct a sufficient number of transactions per day;
- Deals from 5 minutes can be analyzed. Moreover, the higher the timeframe, the greater the likelihood of a correct forecast;
- The ability to use indicators. Of course, it is also possible to impose indicators for minute deals, however, they are unlikely to show reliable information.
Long-term options
Options until the end of the week or month are used less often in binary options, since it takes a long time to wait for a possible profit. However, in some situations, such trading will be fully justified. But more on that later.
All transactions involve risks. But, if you carefully analyze the asset before entering into a transaction, you can be almost sure of a positive outcome.
However, each option lends itself to analysis in a different way. For example, the easiest way to predict an option with an expiration at the end of the day, as exchanges are more predictable before closing. But at the beginning of the day, it is better to protect yourself from buying options, since at this moment there is practically no information about the state of the market.
Hourly and daily options are the most stable after long-term trades. However, the latter are not popular, since many traders, especially beginners, find it psychologically difficult to tune in to the analysis of such a long expiration.
Short term options are most effective. After all, profit can be accrued every few minutes. Combining this with skillful analysis and actionable strategy, you can get a pretty decent percentage of successful trades.
However, short-term trades have one main drawback, which not everyone can cope with. The ability to buy options so often pushes the trader to enter into erratic trades. As a result, he gives in to excitement, and binary options become a platform not for trading, but for a game that resembles roulette.
Selecting expiration by type of analysis
You can also choose the optimal expiration time by the type of analysis.
- If trading is carried out using candlestick combinations (on a trend change or reversal, etc.), then usually 2-3 candles will be the optimal expiration. That is, if the timeframe of each is 5 minutes, the transaction time should be 10-15 minutes;
- If your main strategy is based on drawing support and resistance lines on the chart, while trading on a rebound from them, the expiration time should be 3-4 candles;
- But when trading on a breakdown of the line, you should make deals with an expiration of up to 10 candles;
- Trading with a trend is one of the most popular methods for a trader. Usually, in such cases, you should buy an option with an expiration of up to 30 candles. Although you don't have to always stick to of this rule... Some transactions can be profitable even in a much shorter period;
- When trading on news, a wide variety of expirations can be used. For example, if the news from the annual report of a bank was taken as a basis, the expiration period can be up to a month. But when any top news is released, for example, the publication of the volume industrial production a specific country, a deal can be opened even for a few minutes.
Expiration selection for a beginner
Trading with an expiration of up to 5 minutes is increased risk... Accordingly, no matter how much beginners want to increase their capital in a matter of minutes, this is not recommended. Otherwise, instead of rapid growth income, you can face an even faster drain.
By far, options with weekly or even monthly expiration are the most stable. But it is unlikely that a beginner will be able to conduct an independent analysis for such a period.
Based on this, it becomes obvious that the best option for a beginner speculator there will be expiration from 15 minutes to several hours.
When you gain experience in trading, such questions will not arise. The expiration time will be narrower technical issue, to which you will answer already intuitively.
The term "expiration" is applicable to binary options, where the main indicator is the time during which the transaction continues and completes. Expiration is the moment when the option expires and the player takes profit or loss. The duration of the transaction is determined by the trader based on trading strategy, trading period, trading conditions (news, economic data), etc.
Depending on the chosen broker (IQ option,), a trader can either independently choose the option execution time (up to 30 seconds), or accept the broker's conditions, which sets the moment of completion of the transaction based on technical capabilities. Also, some brokers allow you to increase the expiration time for already open options.
Advice: when choosing a broker for trading, give preference to companies that allow you to increase the time for open options. This will reduce the risks if an open trade is at a loss at the time of completion.
Types of expiration dates
Binary options brokers offer a wide range of expiration times, from turbo options, where a trade lasts from 60 seconds to 5 minutes, to longer options of a month or more. Right choice the moment the transaction is completed plays important role in binary options trading.
Newbies, as a rule, choose the timing of an option at random and unconsciously, without thinking about the current market situation and developing their own trading style. Novice traders most often use intraday trading, which is characterized by the opening a large number trades with a short option expiration time - from 60 seconds to 1-2 hours.
The profitability of trades in intraday trading is much lower than in long-term options, therefore, it is associated with increased risks. This type of trading is suitable for those traders who are confident in their knowledge and are not afraid to take risks. For beginners wishing to short term get quick results and high profitability its trades, it is not recommended to practice intraday trading.
For traders who have doubts about choosing the correct expiration time for a trade, it is recommended to use b O longer term for options. With this approach, the number of transactions is reduced, which gives the trader the opportunity to more carefully assess the situation in the market.
Longer term options are less risky. When opening deals, you can rely not only on technical analysis, but also on economic news and other events in the world that may have an impact on quotes.
The disadvantage of long-term trades is the lower percentage of reward compared to turbo options. For example, when trading options for 5 minutes, the trader will receive 85% of the invested amount, while when opening a deal for 24 hours or more, only 70%.
How to choose the right expiration?
When getting acquainted with financial markets, a trader faces many questions - what is it, etc. But the main question is how to choose the options expiration time to achieve the greatest profitability.
When using a ready-made trading strategy, there is no problem in choosing the option expiration time, it is indicated in the description of the strategy itself and has been verified by other traders.
In the case of creating your own strategy, you must adhere to the following rules:
- when choosing the duration of transactions, be guided by the working time-frame on which the quotes are analyzed;
- choose the moment of completion of the transaction, equal to x3 or more candles of the working time frame;
- take into account the selected asset for trading, for indices and commodities - from 5 minutes to 1 hour, for currency pairs - from 1 hour to a month, for stocks and other instruments stock market- from a week to a year.
Most traders choose an expiration of 3-5 candles on the working time frame. That is, if a trader analyzes a 5-minute chart, the transaction time will be 15-25 minutes. The duration of the option can vary depending on when the volatility of the currency pairs increases.
It is worth noting that strategies originally developed for long-term transactions behave quite differently on small time frames. Analysis tools (indicators, advisors, etc.) designed for a longer period will have different indicators in medium and short-term trading. The combination of the described nuances should lead the trader to choose the optimal expiration time of transactions, which will correspond to his trading strategy and trading style.
When is a trade closed in the Forex market or while trading on the exchange? At any time or upon reaching certain levels. Everything is different with binary options. The time of the closing of the deal is set by the trader even before the opening of the contract. The moment of closing is called expiration.
The outcome of the deal directly depends on the choice of the expiration time for options. Close too early, the price may not wait for the necessary impulse and not move in the right direction. If you are late, you will also lose money.
We will not pour water and say in more detail what the expiration period for options is. Everything is clear. This is the moment when the deal is closed, and it is set before the contract is opened. Everything. No more background information. Moving on to the meat.
Expiry options
Brokers allow you to set the expiration time of the transaction for almost any time: from a few seconds to several months. Let's talk in more detail about the features of each option.
Tick trading
Although no, it cannot be called a trade. Let's go like this - "tick game". Most quick option binary trading. A deal can be closed within seconds after opening.
Tick is minimal change prices. By choosing the expiration time, say, 5 ticks, the option will be closed after 5 price changes. This usually takes no more than 5-7 seconds.
Is it possible to consistently win in this way of "trading"? Some "experts" argue that in order to earn money, you need to open tick options in the direction of the trend. In fact, the effectiveness of this is zero. There is not a single method of analysis that will allow you to make accurate predictions of price changes in the next 10 seconds. This is simply not possible.
Nevertheless, if you do not have enough excitement and want to play a little with small amounts, we recommend a broker. It is one of the few companies that offers tick expiration dates. In addition, the minimum transaction amount here is only 50 cents. And the broker is one of the most reliable. The return on tick options on the Binary platform typically exceeds 90%.
Turbo options
But this trading option is offered by absolutely every broker. Turbo options close in the range from 1 minute (sometimes from 30 seconds) to 5 minutes.
Turbo - business card binary trading, because almost every broker likes to mention that on their platform every trader can earn about 80% in just 1 minute.
There are a dime a dozen strategies for turbo options on the Web. They will also be on our site. And sometimes they are really able to help make money on such fast trading. However, you should understand that scalping on BO (this is the name of the method of trading with a closing time of up to 5 minutes) is one of the most risky ways to make money, which is second only to tick options in this regard.
We do not recommend newbies to trade turbo options. In addition to the incredible difficulty of predicting them, you will also face other problems. For example, a feeling of excitement. When I leaked a certain amount in 2 minutes, it seems that in another minute you can return what you lost. As a result, the trader starts to play. Let's face it, turbo options can also be called a game, even if you approach the matter with a hungry head.
Analyzing turbo trading is very difficult. This is why many pros do not use turbo in trading.
When choosing a broker for turbo trading, pay attention to 2 criteria: profitability and speed of opening a deal. Ideally, both parameters allow you to work comfortably with fast contracts.
Short-term deals
Exchange speculators and Forex traders consider all transactions that were opened and closed within one day to be short-term trading. But on the BO everything is somewhat different. Most often, contracts from 5 to 60 minutes are considered to be a short-term expiration date for options.
In this case, we can already say that it is possible to conduct market analysis, which allows us to count on stable income and more confident profits.
Short-term trading is suitable for anyone who does not want to play on BOs, but also cannot bear the feeling of expectation.
This method of trading is provided by almost every broker, although there are rare exceptions.
Medium-term contracts
The expiration times of options for medium-term trading are limited to transactions from one hour to the end of the day. Personally, it seems to us the best option for trade. However, you can disagree with us.
This trading option allows you to accurately analyze the market by any method of technical analysis. Indicators, candles, graphic instruments work more correctly on medium-term contracts. This is because market noise on such periods is no longer as noticeable as when trading with the previous expiration time of options.
However, there is one drawback in medium-term trading - it cannot be used on all trading platforms. Even not all top companies provide this opportunity. For example, on Binomo, the maximum expiration time is 1 hour.
Long-term deals
The expiration date for long-term options can be several days, weeks or months.
Such trading has its own significant advantages:
- This is the safest trading option. It lends itself well to market analysis, including fundamental;
- No need to sit in front of the monitor for a long time. It is enough to make a forecast and open a deal. After that, you may not open charts at all for several days. The long term expiration time of options saves time for other things.
But there are also disadvantages:
- Not every platform allows you to open deals for such a period. However, finding a broker is not that difficult. We recommend taking a closer look at Utrader or Verum Option;
- This trading method is not suitable for everyone. If you are not ready to wait a long time for the result and profit, you are unlikely to be interested in long-term trading, despite its merits;
- For trading you need more money... Deals will be opened less frequently. Accordingly and possible profit will also be below. It will not work to open several long-term trades every day, since the signals will appear less often. To understand how much you need to invest, we recommend trading for a month with the usual amount. As a result, after receiving a monthly income, you will understand how much more you need to invest.
Each trader chooses for himself optimal date expiration of options. We gave our recommendations. But perhaps you have your own opinion and your own strategies.
A little tip in the end: choose a timeframe in accordance with the expiration
In the end, I would like to give 1 simple advice on trading. When you open a trade, you must analyze it on the appropriate timeframe.
It is useless to look for an entry point with a close in 30 minutes if you analyze the hourly chart. And, on the contrary, the weekly tendencies are not watched on the one-minute timeframe - it is useless.
Choose the right trade duration, but don't forget about others. important things: strategy, money management, etc.
