However when choosing the right binary option to trade it’s important to understand how time and underlying price contribute to the binary pricing. As the time remaining in a binary option changes, so does the price that investors need to pay for that option. The better your understanding of how time can alter the price of a binary option, the greater chance you have of success.
Let’s take a quick look at the EUR/USD as of Thursday night just shy of 4:00 p.m. ET. Here we see a chart of the EUR/USD trading at 1.05083 as of 3:51 p.m. ET Thursday. Along the right axis are some of the available binary options that expire at 7:00 a.m. ET on Friday, leaving just over 15 hours until expiration.
If you wanted a little more time for your trade then you could instead consider the EUR/USD binary options that expire a later in the day at 11 a.m. ET on Friday morning. Here is the same chart at about the same time Thursday afternoon, yet the only difference is this time the binary options listed along the right axis expire at 11 a.m. ET, leaving just over 19 hours until expiration.
The only difference in these two charts is that there is an additional 4 hours of exposure if you choose to trade the 11 a.m. ET binary options, which explains why they are slightly more expensive at each price level.
Depending on your trading methodology and market expectation either market could be a suitable choice. Knowing the value of time can be a crucial element to maximizing your profit in any trade. Take a moment and see for yourself how at each similar strike price the bid/offer on each charts varies slightly, which is priced in according to the differing amount of time remaining until expiration.
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