What is the expiry time of a trade?
Expiry time refers to the time for which a trade will stay valid. Any trade executed in the binary options market cannot continue indefinitely. The trade has to expire at some point in time. From the time when the trade starts or begins to the time when the trade ends is the period referred to as expiry time. Let us consider a quick example. A trade starts trading at 10:00 AM EST and decides to buy a Call Option for 15 minutes of trading. So, the trade will end at 10:15 AM. There are no chances that the trade will continue even for an extra second to clock 10:15:01 AM. This is simply not possible. So, 10:00 AM to 10:15 AM refers to the trading period during which the trade is active and those 15 minutes are referred to as expiry time. After those 15 minutes, the trade will expire or die or will cease to exist or in simple language, the trade will become invalid. The outcome of the trade will be determined exactly at 10:15 AM. Now, in binary options trading, there are different expiry times allowed by the brokers. Some of the most common and predefined expiry times allowed by the brokers are 60 Seconds (i.e. 1 minute – trade ends exactly in one minute), 5 minutes, 15 minutes, 30 minutes, 1 hour, 1 day, 1 week, 1 month, 2 months and even up to 1 year. There is a catch. Not all types of binary options trading strategies will allow traders to select from the entire range of expiry times. Some strategies will only allow expiry time of 1 week, or some may allow only 1 year expiry time. No other expiry time can be chosen by the traders. There is a good side though!
For certain binary options trading strategies, the broker allows the traders to define their own expiry time. This flexibility is however available for highly advanced trading strategies where experienced traders control and define different aspects of the trading contract depending on their risk appetite. Once they define the parameter values, the contract becomes final and is locked and the trading takes place according to the customized parameters. This is not suitable for new traders who do not have or have bare minimum experience of options trading. With this type of flexibility, risk factors increase significantly.
What is strike price?
Strike price refers to the price of an underlying asset at which a particular contract is executed or exercised. Strike price is generally the prevailing market price at the point of time when the trader enters the market and agrees on a contract by buying an option. If we revert back to our examples given above, a trader who enters the market at 10 AM and decides to trade in a stock with a prevailing market price of $10 with a speculation that the price of the stock will move up for the expiry time of 15 minutes and buys a Call option for $20, the prevailing market price of the stock (i.e. $10) is locked as the strike price. Similarly, if the trader thinks that the price of the stock will move down within the expiry time of 15 minutes, he will buy a Put option by investing a certain amount (in our example it is $20) and the prevailing market price of the stock (i.e. $10) will become with strike price.