WAIT UNTIL EXPIRATION OR GET OUT EARLY

WAIT UNTIL EXPIRATION OR GET OUT EARLY
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No one can give you a hard and fast rule about when to hold a binary option until expiration and when to exit early. It’s a personal choice. Generally people exit early for one of two reasons: to take profits or to get out with a smaller loss than the maximum (the amount you paid to enter the trade).

Here’s a situation where traders often take profits rather than holding on. Let’s say that same EUR/ USD > 1.1300 jumps up 12 points and is now in the money.

If it’s in the money, the binary option has likely gone up significantly in value, maybe to $80 or more. If you have a binary option that is trading at $90 with three hours left until expiration, do you want to hold out for that last $10 of potential profit? Or do you take the actual profit you now have? After all, if you bought it at $30 you’ve just gotten a nearly 200% return in a few hours. Not bad for a day’s work, as they say. (Of course, that’s a hypothetical result and not meant to represent a typical trade on Nadex. Your actual results may vary.)

WAIT OR GET OUT EARLY

This isn’t a suggestion of what you should do, but many traders would do what old floor traders who came up in the ‘70s and ‘80s call the Steve Miller move: they take the money and run. (Remember that song?) They weigh the two choices: risk losing some of their gains while they hold out for a little bit more versus locking in those gains and giving up a chance to squeeze out a few more dollars. After all, you can always get back in with a new trade.

The same kind of choice would move some traders to get out if their $30 binary option went down to $15 in value with no sign that the market was about to turn upwards and rally. In that situation, the question is, is it better to admit the trade didn’t go as you expected and salvage some of your money than to lose it all clinging to an increasingly faint hope?

You know, that’s important enough to repeat. The purpose of trading isn’t to prove yourself right. It’s to make money.

So when should you hold on till expiration? There are multiple scenarios, and only practice will tell you when you want to hold versus exiting early. But if that EUR/USD did a slow but steady climb to 1.2998, then 1.2999, and now there’s about ten minutes left, you’ll be facing a situation where your binary has already lost some value but is just one tick away from being in the money and worth the full $100.

There’s no right or wrong choice, but can you see why some would hold on to give the market a chance to gain that last tick? You already know your maximum loss. It’s the $30 plus fees that you paid up front. If trying for that last tick is worth $30 to you (versus the $20 or so you’d lose if you exited early), then hold on to the binary until expiration.

Either way, it’s your choice. A choice you can make knowing precisely what the worst case scenario is. That’s the point of binary options trading. Limited risk just might remove some of the limits on your own sense of confidence and possibility.

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