Binary options are a simple, effective and profitable method of investing. One of the most important elements for investors to understand is the binary option expiration rate.
The binary option expiration rate is the market price of the underlying asset at the time the respective option expires. For binary options, the expiration rate is the determining factor of if an investors bid is successful (“in the money”) or not (“out of the money”).
Binary options pay a fixed, predetermined amount (or nothing) upon expiration. The fact that this is a fixed amount that is known by the investor in advance helps investors manage risk compared to other traditional trading mechanisms.
For example, if an investor wishes to trade using an index like the Dow 30, the binary options expiration rate is a critical factor in achieving trading success. Taking an example where the binary options platform lists a value for the Dow 30 of 11,111.11 and a four-hour expiration time, users should first gain an understanding of how the index has been tracking over the short and medium term. If the past expiries on the binary options platform indicate that the index has been on the decline with a daily high of 11,121.11, users may want to execute a CALL option. This view may be taken by investors as they believe the binary options expiration rate listed (11,111.11) is quite low compared to how the market is tracking and that the value is likely to rise above the current price.
The expiration rate influences the binary option outcome as it is key to determining the outcome of an investors bid. Investors take a view of how an asset will move based on the expiration rate and the time listed for the bid. These two elements play critical roles in how well an investor will meet their financial objectives.
Most importantly, the binary option expiration rate influences the binary option payout. It does this because it influences an investor to select whether an assets price will rise (through a CALL option) or decline (through a PUT option). Once the threshold of the rate is achieved, the user will be “in the money” and experience positive financial returns.
Keeping a close eye on the expiration rate listed in comparison to information on past expiries and other market data, is an important step in placing a bid. By investing the time in doing research on the price and market movements, investors will be armed with the right tools to assess whether an asset will rise or fall and see success in their binary options trades.