For long, experts considered the inability to get out of a trade at will to be the greatest drawbacks of binary options trading. However, the scenario has considerably changed over the past few years. More and more binary option brokers are offering early exit facilities, which many professionals perceive as a must have feature. While the early exit facility is a great boon to traders, it has increased the complexity of the binary contracts from a broker’s point of view. However, considering the fact that it would indirectly lure clients for the broker and contribute to the growth of binary options industry as a whole, several binary brokers have taken pains to create in-house strategies to mitigate risk.
The first and foremost advantage of the early exit facility is that it enables a trader to cut down losses. Seasoned traders in the financial markets would vouch for the fact that a trader who is good at cutting down losses and riding on profits would eventually become a highly successful trader.
Most binary brokers who offer early exit facility use a combination of several factors to determine the amount reimbursed. These include the underlying price of the asset, time remaining to expiration, and whether the contract is ‘in the money’ or ‘out of money’. To manage the early exit feature in an efficient manner, binary brokers offering early exit facility lay down some constraints such as barring the feature in the first and last few minutes of the contract period.
The facility can be used by a trader when there is a firm trend reversal in the price of the asset. Nobody can predict the price of an asset perfectly all the time. The price of an asset can reverse at any time due to fundamental or technical reasons. In such circumstances, a binary trader who has taken a position can exit quickly and prevent erosion of capital. Of course, the trader will lose a portion of the investment, if the price is moving against him. Still, it is far better than losing the entire investment, which will demoralize a trader. On a large scale, if a trader is facing a streak of losses, which is quite common even for successful traders, then the savings from the early exit facility would add up to a considerable amount later on.
Even though, only a handful of binary brokers listed below are currently providing the facility, we can expect more to come forward in the future. As such, binary options trading business is currently evolving and new features of this kind can be expected to be introduced by established binary brokers in the larger interest of the industry as a whole.