If you’re a currency trader looking for defined risk trading opportunities then binary options could be a good match. With so much uncertainty in the markets about what the future may hold with a new President just beginning to implement his agenda, binary options provide trading opportunities in currencies, indices, and commodities on various time frames and all with defined risk.
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.
To see for yourself the types of defined risk trading opportunities on the Nadex Exchange open a demo account today and they’ll provide you with $25 K of practice funds to experiment with before investing any of your hard earned real cash. There is plenty of uncertainty across the world right now, and that uncertainty could provide for fast move in currency markets. Be ready for the next great currency trade by opening a Nadex account today.
Nadex Risk Disclaimer
· Trading on Nadex involves financial risk and may not be appropriate for all investors. The information presented here is for information and educational purposes only and should not be considered an offer or solicitation to buy or sell any financial instrument on Nadex or elsewhere. Any trading decisions that you make are solely your responsibility. Past performance is not indicative of future results. Nadex instruments include forex, stock indexes, commodity futures, and economic events.
· Nadex binary options and spreads can be volatile and investors risk losing their investment on any given transaction. However, the limited-risk nature of Nadex contracts ensures investors cannot lose more than the cost to enter the transaction. Nadex is subject to U.S. regulatory oversight by the CFTC.