Binary Options Contract Lengths
Binary options contract lengths are the most crucial variable for traders other than price direction. This guide breaks down the typical contract durations available to traders and explains the pros and cons of short-term binary options contracts versus long-term binaries. Read on for examples of expiry time-specific binary options strategies and our verdict on the best binary options contract length to pick.
Binary Options Brokers
Binary Options Explained
Before we dive into binary options contract lengths and expiry times, it is a good idea to ensure you are familiar with the intricacies of this instrument.
The simple definition is that binary options are a trading derivative designed to help investors speculate on the price movement of selected markets such as forex, commodities, stocks, ETFs, and cryptocurrencies.
In the most basic form of binary options trading, clients wager their capital that an asset’s value will increase or decrease from its current price after a set expiry time. Brokers offer payouts of up to 95% for a correct prediction.
In addition to up/down binary options, additional variants such as the ladder, touch and boundary binary options allow investors to speculate on volatility and the amount of price movement.
Importantly, binary options are popular due to their relatively large potential payouts for small price movements, capped losses and simplicity. However, some traders dislike this instrument due to its lack of regulatory oversight and capped gains.
Binary Options Contract Lengths
Many binary options brokers offer a wide range of contract lengths to cater to all trading styles. Our experts have grouped binary options contract lengths into three key groups:
Short-Term Contracts
Short-term binary options contracts have expiry times of a few seconds up to five minutes. Often referred to as turbos, expiry intervals with popular brokers are 10 seconds, 30 seconds and 60 seconds.
This type of length often suits momentum or correction-based trading, where prices are likely to move only in a single direction within a short time frame. Breaking market or global news can often catalyse these patterns for forex and commodity markets, as can earnings reports and stock dividend announcements.
Medium-Term Contracts
While trading binary options, we found that medium-term contracts with five-minutes to one-day expiry times offered day traders the most utility. Popular intervals in this time frame include 5-minute, 30-minute, 1-hour and end-of-trading-day binary options.
Medium-term contracts are short enough to capitalize on market momentum while long enough for asset values to ride out slight deviations from a solid directional trajectory.
Long-Term Contracts
Some brokers offer longer-term contracts with expiry times from over one day up to several months. Longer binary options contract lengths tend to be offered on US binaries, also known as fixed return options. These are normally exchange-traded and operate slightly differently from European-style binary options.
The longer expiry times of such binary options contracts allow investors to take advantage of more fundamental and gradual price changes. However, long-term contracts have several disadvantages.
One concern is that your trading capital is locked up for a prolonged period. This is particularly pertinent for a fixed-return instrument such as binary options. Another is that payouts tend to be lower on longer-term contracts – more on this later.
Trading Examples
Here is an example of different binary options contract lengths and how they can affect trading strategies. For this example, we will use a popular forex asset, EUR/GBP, available at most binary options brokers and platforms.
The current price of EUR/GBP is 0.85000.
Trader A believes that based on short-term momentum, the pound will weaken and EUR/GBP will rise in value within the next 30 seconds.
To capitalize on this opportunity, Trader A stakes $100 on a long binary options contract with a 30-second expiry time. Based on the asset and expiry time, their potential payout is 85%, or $185 ($100 stake + $85 profit).
Trader B also believes that the pound will weaken, but sees this as part of a longer, fundamental-based trend rather than short-term momentum.
To avoid short-term fluctuations impacting their trade, they opt for a 6-hour expiry binary options strategy, also going long on EUR/GBP. They also stake $100 and their potential payout is 75% or $175 ($100 stake + $75 profit).
After 30 seconds, the price of EUR/GBP has dipped slightly to 0.84350. As a result, trader A loses their $100 stake. Trader B’s contract is still open.
After 6 hours, EUR/GBP rebounds and has risen to 0.85200. This means that Trader B’s contract finished in-the-money and they are paid out $75 on top of their initial $100 stake.
Payouts
Payouts on binary options are based on two variables – expiry times and the specific market. Brokers view shorter-term price movements as more challenging to predict and traders can gain lucrative payouts of up to 95% for short-term contracts.
Medium and long-term patterns are easier to predict and therefore offer reduced payouts. After adjusting the contract length, these values will be reflected in a binary options brokers’ integrated trading calculator or previewed on their web-based platforms or MT4/MT5.
It’s worth mentioning that maximum payouts vary from broker to broker. So for optimal profit potential, sign up for a competitive broker in this area.
Note, the top firms also offer daily calendars and free educational resources with expiration dates and charts explained. Customers can also get answers on contract length questions from a firm’s customer support team.
Pricing & Fees
Many investors will want to know whether binary options contract length affects trading fees and prices.
Thankfully, our experts can confirm that traditional, European-style over-the-counter (OTC) binary options contracts typically have no trading fees at all, meaning brokers gaining an edge from their payout amounts.
While US-style, exchange-traded binary options have a commission for buying, selling and cashing in a winning contract, contract length does not typically affect these charges.
Cashing Out
Some binary options brokers offer investors the chance to cash out early on a contract to either lock in profits or reduce losses. However, this is only a viable option for medium to long-term contracts, as short-term expiry times leave investors little time to readjust to changing market conditions.
Reselling contracts is a more profitable and accessible strategy with US-style binary options. This is because these contracts are exchange-traded rather than offered over-the-counter.
Broker Availability
The available binary options contract lengths can differ significantly between online brokers.
Extreme binary options contract lengths on either end of the expiry time scale, such as one-second, three-second, one-week, or one-month contracts, will be rare. However, we found that almost all brokers support medium-length contracts such as one-minute or five-minute binary options.
There is no need to download any software to preview the expiry times of a broker. Instead, investors can either sign up for a demo account or contact customer support for a company’s full range of contract lengths for EU or USA-style options.
Strategies
Several strategies are available to traders, with different plans suited to various binary options contract lengths. Here are four systems highlighted by our traders:
Trading Fundamentals
Fundamentals trading is all about the long-term outlook of an asset, also taking into account the price history of an asset. For example, this can be if an asset’s sector is due for a seasonal boost or your analysis of its price determinants reveals an asset as overvalued. Technical analysis can also play a part in these trades, with historical data from trading graphs a valuable tool to corroborate fundamental beliefs.
Long-term binary options are best suited to this type of trading technique, as price movements tend to reflect fundamentals more than market momentum over an extended period such as a week or month.
Trading Momentum
Inversely, trading momentum is based on short-term price direction, with asset fundamentals not playing such a significant part. Momentum is often triggered by news such as layoffs at a company, interest rate changes that affect a forex currency or the announcement of a global commodities shortage.
Short or medium contract length binary options are ideal for momentum-based trading. One-minute and five-minute binary options contract trading strategies allow investors to make potentially large gains from momentum-based moves.
Trading Volatility
With volatility trading, investors are betting on the size of price movements rather than their direction. The binary options boundary variant can be used for this strategy, with traders either speculating that an asset’s value will remain within a preset price corridor or finish outside it at expiry.
As with momentum, either short or medium binary options contract lengths work well with volatility trading, with daily periods of volatility unlikely to extend into the long term.
Hedging
Combining long, medium and short binary options contract lengths can be used to mitigate losses or lock in profits. Alternatively, traders can use binary options contracts with any expiry time to hedge open positions in other instruments such as CFDs, stocks or futures.
Final Word On Binary Options Contract Lengths
Binary options are a versatile and popular trading instrument. Investors can access a great variety of expiration times to implement different trading strategies. In this review, we have covered key information such as that payouts differ based on the expiry time of a contract, along with the suitability of potential strategies.
Use our list of the best binary options brokers to find a contract length that suits your goals and trading style.
FAQs
What Is The Best Expiry Time For Binary Options?
Short, medium and long-term binary options contract lengths all have their merits. However, short and medium-term contracts offer the most lucrative returns and allow trading capital to stay liquid rather than locked up in a long-term position. Short to medium-term binary options contract lengths typically range from several seconds up to one day.
What Are The Best Times to Trade Binary Options?
Binary options trading is especially profitable around periods of significant directional price movement. In addition, variants such as boundary binary options allow traders to profit from periods of high or low volatility.
Which Brokers Offer The Best Binary Options Contract Lengths?
Some brokers offer a wider range of binary options contract lengths. In contrast, other platforms specialize in short-term or “turbo” options. For example, when trading US-style binary options with a broker like Nadex, expiry times tend to be longer and range up to several months. Alternatively, Pocket Option offers a good range of binary options contract lengths from one minute up to four hours.
Which Binary Options Expiry Times Give The Biggest Gains?
For the majority of trading assets, short contract-length binary options offer the most significant potential payouts. These can range from 70% up to 95%+.
Can I Make Binary Options Contract Length Extensions?
Unfortunately, most brokers have no option to extend binary options contracts. However, investors can double down on or hedge their positions to alter the trade dynamics of an existing contract.