Binary option trades can take place for a range of times. The most common binary option trades are 1 minute or 5 minutes in length, but there are many other trade lengths available to suit different traders preferences.
Binary Options Trades Only Have Value Upon Expiry
Unlike traditional options, which have value before the expiration date, binary options trades are final (you can not sell them before expiration). A trader can not sell a position, and once a trade is taken it is considered a final decision. A trader must hold the trade until the option expires without exception. The time until expiration is different for each trade, and is determined by the brokerage. Always consider the time to expiration before entering into a trade, because a trade must be in the money at the precise time of expiration for it to be of value. If the trade is below the strike price at the time of expiration, the trade will expire worthless.
Most Binary Option Traders Prefer Short Trades
The binary option industry has carved out a niche based upon the human need for instant gratification. Most brokers dangle trades in front of traders as short as 30 seconds. This gives a trader the opportunity to make up to 80% profit in less than a minute! This sounds fantastic, and it can be, but unless you have a system or a read as a trader to make money in 30 second time frames, it is a losing proposition for you. If you do have a system or read which is capable of some degree of predictability on a trade on a very short basis, make sure that you are sizing your positions appropriately. If you are taking many positions in a short period of time, you have the ability to lose (or earn) a lot of money very quickly. While the ability to take short time period positions is useful, a trader must manage this carefully.
Most Trades Are 1 to 5 Minutes Long
The most common time period for binary options trades are between one and five minutes. The brokerage will display the time period on each trade, and it is up to the trader to monitor these and to ensure that they are entering into a trade for the desired period of time.
Other common time frames may be a half hour, or one hour in time.
Some Trades Are Available For Longer Periods
Some brokerages offer traders for a period of a month or longer. Before entering into this type of trade, be mindful that your capital is tied up until the expiration date. A binary option position can not be sold for value once entered into. This type of trade can be useful for someone who has very high conviction on the direction of a security over a long period of time. As binary option trading expands, more trades of longer time periods are likely to be made available to traders.
Longer trades are typically offered with foreign currency transactions. This is largely because foreign exchange traders rarely have a short term read on the direction of a currency, but based upon macro-economic factors traders may have more conviction on longer term trades. While foreign currency trades are most common for long term trades, they may also be offered in commodities such as oil, gold, and silver prices, or in some stocks.