The main characteristic of any option, binary or not, is being given by the level the price is at the expiration date. In the case of binary options, either it is in the money (winner) or out of the money (looser) is the most important thing as this defines the success a trader has when trading.
On the spot market, a trader is considered to be successful when closing a position (long or short) with profit. In the case of binary options, a trader is considered to be successful when the option expires in the money (price higher than the strike price in the case of a call binary option and price lower than the strike price in the case of a put binary option).
Binary options can be classified taking into consideration the expiration time:
- very short term binary options: 60 seconds – 1 hour;
- medium term binary options: one week;
- long term binary options: one month and higher.
Binary options are financial products that address mainly the short term needs of traders, and this is one of the reasons why the majority of expiration dates are on an intraday basis. We are talking from expiration dates that starts as low as sixty seconds and go up to a specified number of hour in the trading day.
Medium term binary options should be considered the ones taking on at least one week time frame and this is normally based on technical analysis on higher time frames, like four hours chart or daily chart, or on specific fundamental analysis based on economic releases to come.
And there are long term binary options that can be taken on time frames higher than one month, going even to an yearly basis. In this case things like expiration and fixing times for the regular option market should be taking into consideration as well.
The recording that comes with this chapter shows you the different expiration dates and will actually trade some binary options with different expiration date.