How A Nadex Binary's Price Is Impacted By Time Until Expiration

A Nadex binary contract is built on a Black Scholes Model. Therefore, the remaining time until expiration can have a significant impact on the price of the binary.

Time's Lack of Impact On At The Money Binaries:

A binary's price is not impacted by the time until expiration when the underlying market is at the price that matches the binary's strike. At this time, the binary will be worth approximately 50 whether there are 30 minutes, three hours or three days until expiration. This is the same as an At The Money (ATM) option contract would have, a delta of 50 regardless of how much time is left until expiration.

The impact of time on the price of a binary, and the change in its price, can best be seen in the Nadex binary scanner tool offered free by ApexInvesting.com

In the binary scanner below (section 1), you can see both the ATM binary strike 102.33 12:00 am and the ATM binary strike 102.33 1:00 am are worth approximately $50 when the USD/JPY is trading at 102.33, despite there being an additional hour of time in the binary.

Out Of The Money & At The Money Binaries Move Faster Closer To Expiration

However, if the binary strike is either above or below the market, time has a significant impact on the price. The longer it is until expiration, the slower the binary price will change. The binary's price will change much faster as time passes and the closer it gets to expiration.

In the Nadex binary scanner below (section 2), you can see how the binary with the same strike but with one hour less until expiration is cheaper. It will move at a much faster rate on a 10 pip move in the underlying spot forex USD/JPY pair.

Binaries Price Gets Closer To 0 Or 100 The Closer To Expiration

Not only does the price of the binary move faster the closer it gets to expiration, but the price will also be less if out of the money, or more if in the money. That's because there is less time premium in the binary option.

The binary has to expire at 0 or 100. So the less time there is, the faster is has to move to be at either 0 or 100 at expiration. This is similar to how the delta of an option has to be 0 or 100 at expiration. It is important to note that, just like a call or put option, a Nadex binary contract does not have to be held until expiration.

In the Nadex binary scanner image below (section 3), you can see how the binary costs less money with less time until expiration, which is true on an Out of The Money (OTM) binary.

The above image of the free live Nadex binary price scanner is used with permission by ApexInvesting.com

To see examples of trading on Nadex binaries and spreads, see these articles posted on Benzinga, click here.

To learn more about how to trade binary options and for indepth binary trading strategies, tools and trade rooms see ApexInvesting.com

Market News and Data brought to you by Benzinga APIs

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How A Nadex Binary's Price Is Impacted By Time Until Expiration