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What You Need To Know About Binary Options Outside the U.S
What Do You Need To Know About Binary Options Outside the U.S?
Binary options let traders profit from price fluctuations in multiple global markets, but it’s important to understand the risks and rewards of these controversial and often-misunderstood financial instruments. Binary options bear little resemblance to traditional options, featuring different payouts, fees, and risks, as well as a unique liquidity structure and investment process.
Binary options traded outside the U.S. are also structured differently than those available on U.S. exchanges. They offer a viable alternative when speculating or hedging but only if the trader fully understands the two potential and opposing outcomes.
The Financial Industry Regulatory Authority (FINRA) summed up regulator skepticism about these exotic instruments, advising investors “to be particularly wary of non-U.S. companies that offer binary options trading platforms. These include trading applications with names that often imply an easy path to riches.”
- Binary options have a clear expiration date, time, and strike price.
- Traders profit from price fluctuations in multiple global markets using binary options, though those traded outside the U.S. are structured differently than those available on U.S. exchanges.
- Non-U.S. binary options typically have a fixed payout and risk, and are offered by individual brokers rather than directly on an exchange.
- While typical high-low binary options are the most common type of binary option, international brokers typically offer several other types of binaries as well.
Binary options outside the U.S. are an alternative for speculating or hedging but come with advantages and disadvantages. The positives include a known risk and reward, no commissions, innumerable strike prices, and expiry dates. Negatives include non-ownership of the traded asset, little regulatory oversight, and a winning payout that is usually less than the loss on losing trades.
Understanding Binary Options Outside the U.S
What Are Binary Options?
Binary options are deceptively simple to understand, making them a popular choice for low-skilled traders. The most commonly traded instrument is a high-low or fixed-return option that provides access to stocks, indices, commodities, and foreign exchange.
These options have a clearly stated expiration date, time, and strike price. If a trader wagers correctly on the market’s direction and price at the time of expiration, they are paid a fixed return regardless of how much the instrument has moved since the transaction, while an incorrect wager loses the original investment.
The binary options trader buys a call when bullish on a stock, index, commodity, or currency pair, or a put on those instruments when bearish. For a call to make money, the market must trade above the strike price at the expiration time. For a put to make money, the market must trade below the strike price at the expiration time.
The broker discloses the strike price, expiration date, payout, and risk when the trade is first established. For most high-low binary options traded outside the U.S., the strike price is the current price or rate of the underlying financial product. Therefore, the trader is wagering whether the price on the expiration date will be higher or lower than the current price.
Binary Options Outside the US
Foreign Versus U.S. Binary Options
Non-U.S. binary options typically have a fixed payout and risk and are offered by individual brokers rather than directly on an exchange. These brokers profit from the difference between what they pay out on winning trades and what they collect on losing trades. While there are exceptions, these instruments are supposed to be held until expiration in an “all-or-nothing” payout structure.
Foreign brokers are not legally allowed to solicit U.S. residents unless registered with a U.S. regulatory body such as the Securities and Exchange Commission (SEC) or Commodities Futures Trading Commission (CFTC).
The Chicago Board Options Exchange (CBOE) began listing binary options for U.S. residents in 2008. The SEC regulates the CBOE, which offers investors increased protection compared to over-the-counter markets. Chicago-based Nadex also runs a binary options exchange for U.S. residents, subject to oversight by the CFTC.
These options can be traded at any time, with the rate fluctuating between one and 100, based on the current probability of the position finishing in or out of the money. There is full transparency at all times and the trader can take the profit or loss they see on their screen prior to expiration.
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They can also enter as the rate fluctuates, taking advantage of varying risk-to-reward scenarios, or hold until expiration and close the position with the maximum gain or loss documented at the time of entry. Each trade requires a willing buyer and seller because U.S. binary options trade through an exchange, which makes money through a fee that matches counter-parties.
High-Low Binary Option Example
Your analysis indicates the Standard & Poor’s 500 index will rally for the rest of the trading day and you to buy an index call option. It’s currently trading at 1,800 so you’re wagering the index’s price at expiration will be above that number. Since binary options are available for many time frames—from minutes to months away—you choose an expiration time or date that supports your analysis.
You choose an option that expires in 30 minutes, paying out 70% plus your original stake if the S&P 500 is above 1,800 at that time or you lose the entire stake if the S&P 500 is below 1,800. Minimum and maximum investments vary from broker to broker.
Say you invest $100 in the call that expires in 30 minutes. The S&P 500 price at expiration determines whether you make or lose money. The price at expiration may be the last quoted price, or the (bid + ask)/2. Each binary options broker outlines their own expiration price rules.
In this case, assume the last quote on the S&P 500 before expiration was 1,802. Therefore, you make a $70 profit (or 70% of $100) and maintain your original $100 investment. If the price finished below 1,800, you would lose your original $100 investment.
If the price expires exactly on the strike price, it is common for the trader to receive her/his money back with no profit or loss, although brokers may have different rules. The profit and/or original investment is automatically added to the trader’s account when the position is closed.
Other Types of Binary Options
The example above is for a typical high-low binary option—the most common type of binary option—outside the U.S. International brokers will typically offer several other types of binaries as well.
These include “one-touch” options, where the traded instrument needs to touch the strike price just once before expiration to make money. There is a target above and below the current price, so traders can pick which target they believe will be hit before the expiration date/time.
Meanwhile, a “range” binary option allows traders to select a price range the asset will trade within until expiration. A payout is received if price stays within the range, while the investment is lost if it exits the range.
As competition in the binary options space heats up, brokers are offering additional products that boast 50% to 500% payouts. While product structures and requirements may change, the risk and reward is always known at the trade’s outset, allowing the trader to potentially make more on a position than they lose. Of course, an option offering a 500% payout will be structured in such a way that the probability of winning the payout is very low.
Unlike their U.S. counterparts, some foreign brokers allow traders to exit positions before expiration, but most do not. Exiting a trade before expiration typically results in a lower payout (specified by broker) or small loss, but the trader won’t lose their entire investment.
The Upside and Downside
Risk and reward are known in advance, offering a major advantage. There are only two outcomes: win a fixed amount or lose a fixed amount, and there are generally no commissions or fees. They’re simple to use and there’s only one decision to make: Is the underlying asset going up or down?
In addition, there are also no liquidity concerns because the trader doesn’t own the underlying asset and brokers can offer innumerable strike prices and expiration times/dates, which is an attractive feature. The trader can also access multiple asset classes anytime a market is open somewhere in the world.
On the downside, the reward is always less than the risk when playing high-low binary options. As a result, the trader must be right a high percentage of the time to cover inevitable losses.
While payout and risk fluctuate from broker to broker and instrument to instrument, one thing remains constant: losing trades cost the trader more than they can make on winning trades. Other types of binary options may provide payouts where the reward is potentially greater than the risk but the percentage of winning trades will be lower.
Binary Options Trading Platforms
Before we get to scrutinize the top brokers in the industry, let’s get a quick understanding of what binary options are and what they entail. A binary option is a financial exotic option where payoffs are either cash or nothing or asset or nothing. Further, to help you get a clear understanding; binary options are deceptively one of the simplest trading platforms for low-skilled traders. This is simply because of their easy to grasp criterion of functionality. The most commonly traded instruments in binary options are the high-low and the fixed-return option.
These instruments will give you access to foreign exchange, indices, commodities, and stocks. Also, these options will have a clearly stated time, expiration date, and their strike price. If you make a correct prediction on the market’s direction before the given time, you are paid a fixed return. Conversely, if you make an incorrect prediction, you lose your original investment. So, binary options are all about studying the market and being smart on your prediction in order to thrive in the industry.
However, how do you know the right binary options platform to use in your trading? Why is it important to choose the right broker? Stick along to find the answers in this review.
Why is it so important to choose the right broker to trade binary options?
The answer to this question lies in being able to withdraw your money regardless of the many fraudsters and scammers in the industry. With the large number of trading platforms seeking to make a name in the industry, finding a trustworthy broker can be a daunting task. You might find a platform in an advertisement somewhere on the Internet or maybe read in a magazine and decide to give it a shot.
You successfully make a deposit, perform some trades, and win. However, you realize you cannot make a withdrawal and the platform is just playing tricks on you. So, does it mean you can’t bring into realization your dream of being a professional trader?
You only need to be smart to win your trade and twice as smart to choose the right binary options platform. After all, no one wants their hard earned money to fall into the hands of scammers and fraudsters. So, how do you go about choosing the right broker? There are several key things you should put into considerations when looking for a broker as shown below:
- License – Akin to a game of chess, all the pieces should be put into consideration before making any significant move. Licensing is one of the key factors to check in a legal company. They are simply regulations governing you and the company. If there is no license, there will definitely be irregularities. Therefore, ensure you check the license before making a decision.
- Demo account – No every trader joining a platform is a pro. Both the trader and the company should understand the importance of having a demo account in a trading platform. Put this into consideration and only proceed when you are certain the website has all the necessary requirements.
- Minimal deposit – There is no doubt that some platforms are out to exploit their clients. Trading is fair game and, therefore, the platform should not demand exorbitant amounts as deposits. Choose a platform with a minimal or reasonable deposit.
- Fast withdrawal – What’s a better feeling than the ability to successfully win a trade and make a fast withdrawal? Of course, it’s every trader’s wish to have their dues as soon as possible. For this reason, when searching for your ideal broker, ensure you check whether a given site offers timely withdrawals.
- Reputation – A high reputation means it is favored more than others. For a trading company to gain reputation in the industry, it has to offer top-notch services to its clients. Therefore, if you encounter a broker with a high reputation, there is no doubt it offers exceptional services.
5 tips and tricks to saving your money
If you are a trading enthusiast perhaps you have heard the phrase “plan your trade; trade your plan”. This scenario helps you keep your loses at the lowest level. However, for a new trader, these tidbits of information might seem irrelevant or a distraction rather than an auction advice. Nonetheless, do not shy off as we have compiled several tips and tricks to ensure you are successful in the trading world.
Follow these rules and your success will be inevitable:
Rule no.1: Treat trading like your business
Firstly, you should realize that any business with an initial investment should be treated seriously. Otherwise, you might end up losing it all. Whether you are doing it as a hobby or business it definitely requires all your attention. Also, put into consideration that, like any other business, it can be expensive to run, maintain, and you might, sometimes, incur losses, expenses, stress, risks, and taxes.
Rule no.2: A trading plan is crucial
Everything that will require you to dig deep into your pockets requires a plan, right? Of course, with trading, you have to be equipped with all the tools needed to propel you to success. One of the key tools is a concrete trading plan. However, what is a trading plan? It is simply a written set of tools that determines your entry, criterion involved in your money management, and your exit. With a well-developed and back tested plan, good results will be inevitable.
Rule no.3: Secure your trading capital
If you don’t want to lose your capital, then you should protect it at all cost. You can do so by saving money to fund your account. Since all traders incur loses- it is part of the business. Typically, protecting your capital entails more on not taking unnecessary risks and doing all things possible to ensure your preserve your trading business.
Rule no.4: Use a stop-loss option at all times
In any business, no one likes to incur losses. Luckily, with the trading business, you get to set your own losing limit using a stop-loss option. This means that if your set trade goes below the set limit the option will immediately settle your trade, therefore, saving you from incurring more losses.
Rule no. 5: Trade only what you can afford to lose
It goes without saying that you should only part of only what you can afford to lose. Typically, trading is more of the same as gambling, which means that you don’t have a guaranteed profit trend. Losing your money can be traumatic, especially if the capital used should not have been risked in the first place.
Top 5 platforms to trade binary option in 2020
This is one of the fastest growing binary options. It was established in 2020 and by 2020 it had registered approximately 30 million active traders. If you are just dipping your feet in the trading world, you will find IQ Option to be quite reliable as it is specially designed in the favor of new traders. However, this does not mean you cannot benefit as an experienced trader, you can make the most out of the website’s numerous trading markets. Many have tried it and experienced positive results, why don’t you give a shot?
The new yet ambitious platform Olymp Trade is quite reliable due to its ability to combine innovative tools and industry practices that are aimed at delivering top-notch services. It has a demo account, plenty of analyzing tools, and numerous markets to trade from.
Binary.com perhaps one of the oldest binary options in the industry. It was established in 1999. It has very flexible trading conditions that always put the client in the control of their most tradable assets.
Although this platform has little or no information, it is registered and certified by CROFR, a Russian regulatory institution. However, the institution itself has no international recognition, which makes Binomo to be considered as unregulated. Note that from their client’s feedbacks, the platform does not meet the contemporary customer needs.
This platform began its operations in 2020. It has very simple tools that are designed to enhance a traders experience in the platform. As a new player, you get to enjoy a demo account to reduce your chances of losing.
Лучшие брокеры бинарных опционов 2020 года – топ и рейтинг торговых платформ брокеров бинарных опционов 2020, по мнению трейдеров (10 лучших брокеров БО + лучшие официальные сайты для заработка в интернете в 2020 году + отзывы)
Актуальный рейтинг (топ 10) лучших торговых платформ брокеров бинарных опционов за 2020 год – это, в первую очередь, показатель надежности и сохранности ваших средств. Информация по официальным сайтам брокеров бинарных опционов очень часто меняется – некоторые брокеры закрываются или перестают работать на территории какой-либо страны, а некоторые добавляет уникальные условия, повышая интерес трейдеров к своей платформе.
Специально для вас, мы подготовили рейтинг из 10 лучших платформ брокеров бинарных опционов 2020 года, а так же перечислим самые интересные официальные сайты для заработка в интернете в этом году.
Лучшие брокеры бинарных опционов 2020 года: рейтинг и топ 10 лучших брокеров в 2020 году
Топ 10 (рейтинг) лучших брокеров бинарных опционов 2020 года был составлен исключительно по результатам голосования трейдеров, которое проходило здесь. Результаты, для вашего удобства, были перенесены в таблицу:
|Лучшие брокеры Бинарных опционов 2020 года, по мнению пользователей|
|1||10$||1$||Обзор брокера||Посетить сайт|
|2||10$||1$||Обзор брокера||Посетить сайт|
|3||10$||1$||Обзор брокера||Посетить сайт|
|4||10$||1$||Обзор брокера||Посетить сайт|
|5||10$||1$||Обзор брокера||Посетить сайт|
|6||9$||1$||Обзор брокера||Посетить сайт|
|7||1$||1$||Обзор брокера||Посетить сайт|
|8||10$||1$||Обзор брокера||Посетить сайт|
|9||10$||1$||Обзор брокера||Посетить сайт|