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What are expiry rules?

The expiry rules determine
the expiration of all tradeable assets
in binary options trading.
  • Expiry
    Rules
  • Importantce
    of Rules
  • An Example
  • Rules
  • Profits made in binary options are very dependent on the price at which the binary option contract expires at. All binary options are given a strike price, and each asset is traded with this strike price. The trader will then predict the direction the price of the asset will take within an allocated period of time. The expiry rate is the price of the underlying asset once the trade has expired.

  • The expiry rate will ultimately dictate whether the asset has gone up or down in value, which determines if the option expires In the Money or Out of the Money. Profits and losses in binary options are therefore a direct result of the relationship between the strike price (original value or current value of an asset) and the expiry rate (the value of the asset once the trade has expired).

  • If we take an example of a trader who decides to invest on EUR/USD based on whether the European Central Bank President Mario Draghi would announce a massive quantitative easing program, the trader is essentially trying to decide what the expiry rate of the euro would be by the time of the announcement. In a Classical Call/Put trade, the trader would set the expiry rate as a price below the strike price of the euro (the market price on trade execution).

  • There are rules guarding the expiration of all assets listed on the Binary Brokerz platform. Most financial assets such as stocks, commodities and currencies are quoted with two prices: Bid/Ask. These represent the prices at which the binary options company will buy the asset from the trader when the trade expires (Bid) and the price at which the asset is sold to the trader when the trade has commenced (Ask). Therefore, each asset will have its own unique expiry rates, since the bid and ask prices for each asset are different. The expiry rules of (Bid+Ask)/2 are generally applied to all assets. However, Indices (such as the Dow Jones or NASDAQ), are usually exempt from this calculation. Instead, they are calculated based on the last quoted price of all the stocks listed in the index.

    Bid
    The last known price prior to the options expiration time, at which a binary option market maker will sell an asset to the trader.
    Ask
    The last known price prior to the options expiration time, at which the binary options market maker will buy an asset from the trader.
    Last Quoted Price
    The last known price prior to the options expiration time that was actually paid for the asset. By definition, this price may or may not be the same as the bid or the ask prices.