Binary Options. Best Things About Binary Options Trading. High profit rate – up to 90% on a single trade. Fast returns – from 30 seconds to several months. Limited risk – trader knows his potential loss or return. Simple trading – rules are very easy to understand. Low investment – trading amount as little as $5. Wide range of assets – currencies, stocks, commodities, indices. Mobile applications – you can trade any time in any place. What are Binary Options? Binary Options Trading. Binary Option Example. Definition of Binary Options: Binary Options are like regular options in that they allow you to make a bet as to the future price of a stock. However, binary options are different in that if the "strike price" is met by the expiration date, the binary option has a fixed payoff of $100 per contract. It doesn't matter if the stock price is a penny over the "strike price" or if it is $100 over the strike price, they payoff from the binary option is the same--$100. They are called binary options for this very reason.
Binary means "2" and binary options have only 2 possible payoffs--all or nothing ($100 or $0). In 2008 the AMEX (American Stock Exchange) and the CBOE started trading binary options on a few stocks and a few indices trading binary options is NOT available on very many stocks or indices just yet. The United States has been slow to accept binary option trading, but binary option trading has been quite popular in Europe for a few years, especially as they relate to FOREX. The best way to understand these relatively new type of securities is to look at the example below. Example of a "Binary Option" Suppose GOOG is at $590 a share and you believe GOOG will close at or above $600 this week. You could buy 5 GOOG Binary Options for a price of, say, $0.30. The multiplier on the binary options is also 100 so five of these options would cost 5 contracts x $0.30 * 100 multiplier=$150. If GOOG closes at $600 or higher by the expiration date then the binary option is worth $100 so five of these GOOG call options would be worth $500, for a profit of $350. It doesn't matter if GOOG closed at $600 or $650, the binary option is still worth $100. If GOOG closes at $599.99 or lower, then the option expires worthless. Currently, all binary options are traded as European style, which means they can only be exercised or settled at expiration. In the U. S., the CBOE offers binary contracts on 2 indices, the SandP 500 Index (SPX) and the CBOE Volatility Index (VIX). The tickers for these binary contracts are BSZ and BVZ.
If you want to trade them, there are not many popular brokers that have added them to their platform. The ETRADEs, TD Ameritrades, Schwabs, and Scottrades have not added them to their platform yet. If you follow some of the ads on the web, the brokers that trade them are not commonly known so there is great risk. Another Example of Binary Options: Unlike traditional calls and puts, binary options do not have set prices. The binary options trader decides the amount of money he wants to bet and invests that amount when he buys the binary option. If the price is $0.25 then he stands to make $0.75 if the underlying moves as much as the investor hopes. The time of expiration for binary options is set at different time intervals throughout the day, such as expirations of 1 hour, 1 day, 1 month, etc. The short duration of these contracts makes them more attractive to speculators and risk takers. Here are the top 10 option concepts you should understand before making your first real trade: Options Resources and Links. Options trade on the Chicago Board of Options Exchange and the prices are reported by the Option Pricing Reporting Authority (OPRA): CFTC Fraud Advisories. The Commodity Futures Trading CommissionЂ™s (CFTC) Office of Consumer Outreach and the Securities & Exchange CommissionЂ™s Office of Investor Education and Advocacy are issuing this Investor Alert to warn about fraudulent schemes involving binary options and their trading platforms. These schemes allegedly include refusing to credit customer accounts, denying fund reimbursement, identity theft, and manipulation of software to generate losing trades. Binary options differ from more conventional options in significant ways.
A binary option is a type of options contract in which the payout will depend entirely on the outcome of a yesno proposition. The yesno proposition typically relates to whether the price of a particular asset that underlies the binary option will rise above or fall below a specified amount. For example, the yesno proposition connected to the binary option might be something as straightforward as whether the stock price of XYZ company will be above $9.36 per share at 2:30 pm on a particular day, or whether the price of silver will be above $33.40 per ounce at 11:17 am on a particular day. Once the option holder acquires a binary option, there is no further decision for the holder to make as to whether or not to exercise the binary option because binary options exercise automatically. Unlike other types of options, a binary option does not give the holder the right to purchase or sell the underlying asset. When the binary option expires, the option holder will receive either a pre-determined amount of cash or nothing at all. Given the all-or-nothing payout structure, binary options are sometimes referred to as Ђњall-or-nothing optionsЂќ or Ђњfixed-return options. Ђќ. Binary Options Trading Platforms. Some binary options are listed on registered exchanges or traded on a designated contract market that are subject to oversight by United States regulators such as the CFTC or SEC, respectively, but this is only a portion of the binary options market. Much of the binary options market operates through Internet - based trading platforms that are not necessarily complying with applicable U. S. regulatory requirements. The number of Internet-based trading platforms that offer the opportunity to purchase and trade binary options has surged in recent years.
The increase in the number of these platforms has resulted in an increase in the number of complaints about fraudulent promotion schemes involving binary options trading platforms. Typically, a binary options Internet-based trading platform will ask a customer to deposit a sum of money to buy a binary option call or put contract. For example, a customer may be asked to pay $50 for a binary option contract that promises a 50% return if the stock price of XYZ Company is above $5 per share when the option expires. If the outcome of the yesno proposition (in this case, that the share price of XYZ Company will be above $5 per share at the specified time) is satisfied and the customer is entitled to receive the promised return, the binary option is said to expire Ђњin the money. Ђќ If, however, the outcome of the yesno proposition is not satisfied, the binary option is said to expire Ђњout of the money, Ђќ and the customer may lose the entire deposited sum. There are variations of binary option contracts in which a binary option that expires out of the money may entitle the customer to receive a refund of some small portion of the depositЂ”for example, 5%Ђ”but that is not typically the case. In fact, some binary options Internet-based trading platforms may overstate the average return on investment by advertising a higher average return on investment than a customer should expect given the payout structure. For instance, in the example above, assuming a 5050 chance of winning, the payout structure has been designed in such a way that the expected return on investment is actually negative , resulting in a net loss to the customer. This is because the consequence if the option expires out of the money (approximately a 100% loss) significantly outweighs the payout if the option expires in the money (approximately a 50% gain). In other words, in the example above, an investor could expect, on average, to lose money. Investor Complaints Relating to Fraudulent Binary Options Trading Platforms. The CFTC and SEC have received numerous complaints of fraud associated with websites that offer an opportunity to buy or trade binary options through Internet-based trading platforms. The complaints fall into at least three categories: refusal to credit customer accounts or reimburse funds to customers identity theft and manipulation of software to generate losing trades.
The first category of alleged fraud involves the refusal of certain Internet-based binary options trading platforms to credit customer accounts or reimburse funds after accepting customer money. These complaints typically involve customers who have deposited money into their binary options trading account and who are then encouraged by ЂњbrokersЂќ over the telephone to deposit additional funds into the customer account. When customers later attempt to withdraw their original deposit or the return they have been promised, the trading platforms allegedly cancel customersЂ™ withdrawal requests, refuse to credit their accounts, or ignore their telephone calls and emails. The second category of alleged fraud involves identity theft. For example, some complaints allege that certain Internet-based binary options trading platforms may be collecting customer information such as credit card and driverЂ™s license data for unspecified uses. If a binary options Internet-based trading platform requests photocopies of your credit card, driverЂ™s license, or other personal data, do not provide the information. The third category of alleged fraud involves the manipulation of the binary options trading software to generate losing trades. These complaints allege that the Internet-based binary options trading platforms manipulate the trading software to distort binary options prices and payouts. For example, when a customerЂ™s trade is Ђњwinning, Ђќ the countdown to expiration is extended arbitrarily until the trade becomes a loss. Unregistered Transactions, Operations, Broker-Dealers, or Trading Exchanges Illegal Options Transactions. In addition to ongoing fraudulent activity, many binary options trading platforms may be operating in violation of other applicable laws and regulations, including certain registration and regulatory requirements of the CFTC and SEC, as described below. Certain Registration and Regulatory Requirements of the SEC. For example, some binary options may be securities. Under the federal securities laws, a company may not lawfully offer or sell securities unless the offer and sale have been registered with the SEC or an exemption from such registration applies.
For example, if the terms of a binary option contract provide for a specified return based on the price of a companyЂ™s securities, the binary option contract is a security and may not be offered or sold without registration, unless an exemption from registration is available. If there is no registration or exemption, then the offer or sale of the binary option to you would be illegal. If any of the products offered by binary options trading platforms are security-based swaps, additional requirements will apply. In addition, some binary options trading platforms may be operating as unregistered broker-dealers . A person who engages in the business of effecting securities transactions for the accounts of others in the U. S. generally must register with the SEC as a broker-dealer. If a binary options trading platform is offering to buy or sell securities, effecting transactions in securities, andor receiving transaction-based compensation (such as commissions), it likely should be registered with the SEC. to determine whether a particular trading platform is registered with the SEC as a broker-dealer, visit FINRAЂ™s BrokerCheck . Some binary options trading platforms may also be operating as unregistered securities exchanges . This would be the case if they matched orders in securities of multiple buyers and sellers using established non - discretionary methods. However, there are cases where a registered broker-dealer with a trading system or platform may legitimately have no obligation to register as an exchange. Certain Registration and Regulatory Requirements of the CFTC. It is illegal for entities to solicit, accept offers, offer to or enter into commodity options transactions (for example, foreign currencies, metals such as gold and silver, and agricultural products such as wheat or corn) with U. S. citizens, unless those options transactions are conducted on a designated contract market, an exempt board of trade, or a bona fide foreign board of trade, or are conducted with U. S. customers who have a net worth that exceeds $5 million. To see the most recent list of exchanges that are designated as contract markets, check the CFTC website . There currently are only three designated contract markets offering binary options in the U. S.: Cantor Exchange LP Chicago Mercantile Exchange, Inc.
and the North American Derivatives Exchange, Inc. All other entities offering binary options that are commodity options transactions are doing so illegally. Further entities that solicit or accept orders for commodity options transactions and accept, among other things, money to margin, guarantee, or secure the commodity options transactions must register as a Futures Commission Merchant. Entities that act as the counterparty (that is, they take the other side of the transaction from the customer as opposed to matching orders) for foreign currency options transactions for customers with a net worth of less than $5 million must register as a Retail Foreign Exchange Dealer. Because of their lack of compliance with applicable laws, if you purchase binary options offered by persons or entities that are not registered with or subject to the oversight of a U. S. regulator, you may not have the full benefit of the safeguards of the federal securities and commodities laws that have been put in place to protect investors, as some safeguards and remedies are available only in the context of registered offerings. In addition, individual investors may not be able to pursue, on their own, some remedies that are available for unregistered offerings. Ђў RememberЂ”much of the binary options market operates through Internet-based trading platforms that are not necessarily complying with applicable U. S. regulatory requirements and may be engaging in illegal activity. Ђў Do not invest in something that you do not understand. If you cannot explain the investment opportunity in a few words and in an understandable way, you may need to reconsider the potential investment. Ђў Before investing in binary options, you should take the following precautions : 1. Check to see if the binary options trading platform has registered the offer and sale of the product with the SEC. Registration provides investors access to key information about the terms of the product being offered. You can use EDGAR to determine whether an issuer has registered the offer and sale of a particular product with the SEC. 2. Check to see if the binary options trading platform itself is registered as an exchange. To determine whether the platform is registered as an exchange, you can check the SECЂ™s website regarding Exchanges .
3. Check to see if the binary options trading platform is a designated contract market. To determine whether an entity is a designated contract market, you can check the CFTCЂ™s website . Ђў Finally, before investing, use FINRAЂ™s BrokerCheck and the National Futures AssociationЂ™s Background Affiliation Status Information Center (BASIC) to check the registration status and background of any firm or financial professional that you are considering. If you cannot verify that they are registered, donЂ™t trade with them, donЂ™t give them any money, and donЂ™t share your personal information with them. Binary Option. What is a 'Binary Option' A binary option, or asset-or-nothing option, is type of option in which the payoff is structured to be either a fixed amount of compensation if the option expires in the money, or nothing at all if the option expires out of the money. The success of a binary option is thus based on a yes or no proposition, hence “binary”. A binary option automatically exercises, meaning the option holder does not have the choice to buy or sell the underlying asset. BREAKING DOWN 'Binary Option' Difference Between Binary and Plain Vanilla Options. Binary options are significantly different from vanilla options. Plain vanilla options are a normal type of option that does not include any special features. A plain vanilla option gives the holder the right to buy or sell an underlying asset at a specified price on the expiration date, which is also known as a plain vanilla European option. While a binary option has special features and conditions, as stated previously.
Binary options are occasionally traded on platforms regulated by the Securities and Exchange Commission (SEC) and other regulatory agencies, but are most likely traded over the Internet on platforms existing outside of regulations. Because these platforms operate outside of regulations, investors are at greater risk of fraud. Conversely, vanilla options are typically regulated and traded on major exchanges. For example, a binary options trading platform may require the investor to deposit a sum of money to purchase the option. If the option expires out-of-the-money, meaning the investor chose the wrong proposition, the trading platform may take the entire sum of deposited money with no refund provided. Binary Option Real World Example. Assume the futures contracts on the Standard & Poor's 500 Index (S&P 500) is trading at 2,050.50. An investor is bullish and feels that the economic data being released at 8:30 am will push the futures contracts above 2,060 by the close of the current trading day. The binary call options on the S&P 500 Index futures contracts stipulate that the investor would receive $100 if the futures close above 2,060, but nothing if it closes below. The investor purchases one binary call option for $50. Therefore, if the futures close above 2,060, the investor would have a profit of $50, or $100 - $50. Binary Options Trading Definition. Binary options trading is a simple way to make money online, The word “binary” means “having two parts” and trading binary options typically involve only two investment possibilities from which to choose. When you invest in a binary option, you will be paid a fixed amount of money at the end of the time period prescribed in the investment agreement … or you lose all the money you invested in the binary option. “ForexSQ” binary options trading experts team confuted this article for you to know what is binary trading options and how to trade binary options in forex market. You will also know about how to open account with the best binary option trading brokers.
What Is Binary Options Trading. When trading binary options in financial markets, you are basically predicting whether the value of the asset (which is the subject of the binary option) will increase in value or decrease in value during a certain period of time. In binary option trading, an investor needs only to predict whether the price of the asset will rise or fall. If an investor correctly predicts the direction of fluctuation (up or down) of the asset’s price, he or she is paid a fixed return on the investment no matter how much the asset’s price fluctuates. In other words, the range of fluctuation is irrelevant investors are paid a predetermined, fixed return, no matter how much the price rises or falls. If the fluctuation is incorrectly predicted, the investor loses all the money he invested. If you think the price of the asset will go up it’s called a “call” option. If you think the price will go down, it’s called a “put” option. For a “ call ” to make money the asset’s price must be above the strike price (the price at which the investor’s call or put option can be exercised) at the end of the prescribed time period. For example, if an investor purchases a cash or nothing binary option on ABC Company for $100 with a binary payoff of $1000, the asset’s price at the end of the time period prescribed in the binary option must be above $100. If it is above that amount, the investor receives a payoff of $1000. If the ending price is below that amount, the investor loses his money. For a “ put ” option to make money the asset’s price must be below the strike price at the end of the prescribed period of time and losses are realized when the price is not below the strike price. These “call” and “put” options are considered “plain vanilla,” as explained in more detail below.
The underlying asset, time frame and “strike” price are outlined upfront in the binary options trading agreement. Binary options trading are available in a large and diverse range of assets, including, stocks (or shares), commodities, foreign currency exchanges (forex) and more. Investors like binary options trading because of the upfront transparency of the investment. When investing in binary options trading , the investor receives detailed information about eventual profits or losses, which means he or she knows exactly how much money will be gained or lost before actually entering into a binary option investment. What is a Plain Vanilla Option? Plain vanilla refers to the most basic version of any tradeable asset or financial instrument. Vanilla options can be applied to a certain category of financial instruments (shares, bonds, etc.) or it can be applied to trading strategies. Vanilla options in binary trading involve one expiration date and a specific price of the asset and no more. Vanilla options are the opposite of “exotic” options. What is an Exotic Option?
Whereas vanilla options involve the most basic version of an asset or mode of thinking, exotic options are those that add an additional component to the transaction that makes the security more complex. Exotic options typically vary from traditional American or European options in terms of either the underlying asset or the way an investor’s return is calculated at the end of the option period. Exotic options are much more complicated than the “call” and “put” choices of plain vanilla options. Options can be categorized based on their expiration cycles, the underlying security which is the subject of the option or the method in which they are traded. How to Begin Trading Binary Options. As with any other investment that could cost you money in the end, there are things to carefully consider before entering into any binary option trading agreement. The first thing, of course, is deciding what asset in which to invest with a binary option. You should also determine the price trends of that asset, the possibilities of reversing those trends and the date at which the option expires. When choosing an asset in which to invest, consider those areas that interest you. If you have an interest in precious metals like gold, you may want to invest in a binary option in the gold market. It’s always advisable to glean as much knowledge as possible before entering into any investment vehicle that could possibly negatively impact your investment portfolio and financial bottom line. What Assets Can be Traded in Binary Options? As mentioned above, there is a wide range of assets in which to trade binary options. Stocks – You can invest in binary options in over 50 of the world’s biggest and most successful companies in a variety of industries, including Coca Cola, Google and more.
Commodities – Binary options are available in the commodities market, including precious metals like gold and silver, petroleum products (oil), as well as agricultural commodities such as coffee and corn. FX Currency Exchanges (forex) — Binary options are available in many combinations of the major currencies (most traded) in the world like the U. S., Canadian and Australian Dollars, as well as the Euro, Japanese Yen and more. Indices – You can also invest in binary options involving indices that track trends in financial markets like the Dow Jones, NASDAQ, FTSE, Nikkei and many more. Binary Options Brokers In UK, Europe, Asia, South Africa. As with any other investment, you will need to open a trading account and work with a properly licensed broker in order to conduct trading in the binary options market. Before finalizing your choice of a broker, do as much research as possible on the trading history of that broker or the brokerage firm that employs him or her. Before signing any agreement you should carefully read the fine print looking for hidden costs and obligations and be sure you understand all the ramifications of winning and losing binary option strategies. Fxpro Forex Broker Founded in 2006, London-based FXPro is an online broker offering Forex trading along with binary options. The MT4, MetaTrader5 and cTrader online trading platforms are available. Plus500 is a company providing online trading services to retail customers. Plus500 broker provides binary options trading to all traders around the world except U. S citizens, The company was founded in 2008 and provides trading in CFDs on a range of financial markets. IG Group is a UK-based company providing trading in financial derivatives such as binary options, contracts for difference and financial spread betting and, as of 2014, stockbroking to retail traders. While the majority of the IG Group’s activities are based in the UK, the company has expanded internationally.
IG Markets is the oldest broker in the best binary options trading brokers list. CMC Markets is a UK-based financial derivatives dealer. The company offers online trading in spread betting, contracts for difference and foreign exchange across world markets. 24option is one of the world’s leading binary options trading platforms. Trade binary options on 60-second options of commodities, indices, stocks and Forex. IQ Option broker is at present relatively popular throughout Southwest Asia, Europe and South America. The parent company in Europe released “IQ option robot” which is too famous for automated trading. HYCM previously known as HY Markets broker is headquartered in London and is authorized and regulated by the Financial Conduct Authority of the United Kingdom. eToro is a social trading and multi asset brokerage company that has registered offices in Cyprus, Israel and the United Kingdom. ETX Capital broker provides Forex, Spread betting and CFD trading options for all types of investors – from tools and education to trading. Markets.
com broker offers seamless trading of over 300 trading assets. Trade stock, indices, currency, Binary options and CFDs with zero commission or fees on our top notch trading platforms, mobile or web. AvaTrade was founded in 2006 in Dublin, Ireland and is licensed and fully regulated in the EU and BVI , as well as Australia, Japan and South Africa. The XM. com CFD broker was established in 2009 in the Republic of Cyprus using the name Trading Point of Financial Instruments Ltd. The broker is regulated by as well as the UK’s Financial Services Authority (FSA). Alpari Ltd was created in Russia in 1998 but moved its headquarters to the UK where it is registered and strictly regulated by the Financial Securities Authority (FSA) , Alpari UK has merged with Alpari Global and Alpari US is registered with and overseen by a number of regulatory agencies . FXTM is an acronym for ForexTime. com, The FXTM forex broker is owned and operated by its holding company FT Global Services Ltd and is based in Cyprus, Belize and Europe’s trading capital of London, UK. The easyMarkets broker is the result of the re-branding of “easy forex“, the name under which this broker was established in 2003. The easyMarkets firm is headquartered in Limassol Cyprus and maintains satellite offices in London UK, Sydney Australia and Warsaw Poland. London Capital Group. London Capital Group Ltd was founded in 1996 in the United Kingdom and regulated by the Financial Conduct Authority () of the UK. LCG trading began offering capital spreads in 2003 and i s one of the leading financial services firms in the UK offering a wide range of investment assets that include Contracts for Difference (CFDs), stocks, indices, major currency pairs, binary options, soft commodities, oil and precious metals.
Fxstay broker team provide professional Forex managed accounts service to their clients. Fxstay team provide VIP managed accounts use dedicate teams which include international traders to Managed investors account with low risk. Fxstay is one of the best binary broker in the world specialized only in managed accounts service. Binary Options Broker In Australia. Pepperstone broker is founded in Australia, Melbourne and has offices in USA, Dallas and China, Shanghai. Binary Options Bank In Denmark. Saxo Bank is a Danish investment bank. It was founded as a brokerage firm in 1992. SaxoBank is one of the best binary options broker in the world. Saxo bank offers trading through its online platform SaxoTrader in Forex, binary options, stocks, CFDs, futures, funds, bonds and futures spreads. Private wealth management services are also offered.
Now you know how to choose the best binary options brokers in the world but continue reading to know about swiss brokers. Binary Options Banks in Swiss. Dukascopy Bank SA is known for its transparency in its Swiss SWFX market place. In June 2011, the product is officially referenced on Dukascopy Bank‘s official web site. The Swissquote Bank also has offices in Zurich, Bern, Dubai, Malta, London and Hong Kong. The Group has 545 employees. Binary Options Brokers In U. S. The Forex. com broker Owned by parent company GAIN Capital . Operating since 1999, FOREX. com was a first mover in bringing currency markets to the retail trader. Forex Capital Markets, better known as FXCM, is an online broker based in the United States. Outside the US, FXCM also provides binary options and trading in contract for difference (CFDs) on major indices and commodities such as gold and crude oil. OANDA broker is a Canadian-based company, In 1996, OANDA Corporation, the US subsidiary, was incorporated in the state of Delaware. Other Binary Options Brokers.
Differences Between U. S. and UK Binary Options Trading. Binary options outside the United States typically have fixed payouts and risks and trades are not conducted on an exchange, but through individual brokers. These brokers make money based on the discrepancy between what they paid out on losing trades and what they collected from winning trades. These foreign binary options are meant to be an “all or nothing” system of payouts on the date at which the option expires. Unless a foreign broker is properly registered with a U. S. regulatory agency such as the Securities and Exchange Commission (SEC), they are not permitted to solicit binary option trading from U. S. residents. As you can see, there are a lot of things to consider when entering into a binary option trading agreement. The professional investors at ForexSQ are always available to answer any questions you may have regarding binary options or any other trading platform. The professionals at ForexSQ hope that you now understand the basics of binary option trading and that you will share our website with family, friends and colleagues through any social media devices you utilize. Please visit ForexSQ. com often to gain valuable, up-to-date information about investing in the variety of platforms available in financial investment markets. As always, should you have any questions or concerns about what is binary trading and how to make money online by binary trading, feel free to contact the professional team of investors at ForexSQ. What Is Binary Trading Options By ForexSQ Infographic Team. The professional traders at ForexSQ have created amazing binary options Infographic for beginners don’t know what is binary options trading, I hope you like it and share it with your peers.
Now you know what is binary trading and how to make money online by binary trading so tip ForexSQ by share this article please on social media networks or blogs and let your friends know what is binary trading, Also if you want to know the difference of Binary options vs Forex trading then read here. I highly recommend to read other ways to make money online like CFD trading or Spread betting trading. The ForexSQ team has also compiled articles about how to making money online by Commodities trading, Indices trading or Equity trading . Join the Conversation. Are you are having issues accessing your investment with your broker ? Is your broker demanding for more funds before you can withdraw ? OR has your broker account been manipulated in any form ? You suspect shadiness from your broker and wish to get a full refund of all your investment ? Get in contact with Hilary for fast an effective solutions. She has massive links in high places. She helped me recover close to $3,000,000 from OptionWeb. My advice is to be wise and act fast NOW.
Her email is hkellyboom at gmaiI dot com. Thank me later! What are Binary Options? Binary Options Trading. Binary Option Example. Definition of Binary Options: Binary Options are like regular options in that they allow you to make a bet as to the future price of a stock. However, binary options are different in that if the "strike price" is met by the expiration date, the binary option has a fixed payoff of $100 per contract. It doesn't matter if the stock price is a penny over the "strike price" or if it is $100 over the strike price, they payoff from the binary option is the same--$100. They are called binary options for this very reason. Binary means "2" and binary options have only 2 possible payoffs--all or nothing ($100 or $0). In 2008 the AMEX (American Stock Exchange) and the CBOE started trading binary options on a few stocks and a few indices trading binary options is NOT available on very many stocks or indices just yet.
The United States has been slow to accept binary option trading, but binary option trading has been quite popular in Europe for a few years, especially as they relate to FOREX. The best way to understand these relatively new type of securities is to look at the example below. Example of a "Binary Option" Suppose GOOG is at $590 a share and you believe GOOG will close at or above $600 this week. You could buy 5 GOOG Binary Options for a price of, say, $0.30. The multiplier on the binary options is also 100 so five of these options would cost 5 contracts x $0.30 * 100 multiplier=$150. If GOOG closes at $600 or higher by the expiration date then the binary option is worth $100 so five of these GOOG call options would be worth $500, for a profit of $350. It doesn't matter if GOOG closed at $600 or $650, the binary option is still worth $100. If GOOG closes at $599.99 or lower, then the option expires worthless. Currently, all binary options are traded as European style, which means they can only be exercised or settled at expiration. In the U. S., the CBOE offers binary contracts on 2 indices, the SandP 500 Index (SPX) and the CBOE Volatility Index (VIX). The tickers for these binary contracts are BSZ and BVZ. If you want to trade them, there are not many popular brokers that have added them to their platform. The ETRADEs, TD Ameritrades, Schwabs, and Scottrades have not added them to their platform yet.
If you follow some of the ads on the web, the brokers that trade them are not commonly known so there is great risk. Another Example of Binary Options: Unlike traditional calls and puts, binary options do not have set prices. The binary options trader decides the amount of money he wants to bet and invests that amount when he buys the binary option. If the price is $0.25 then he stands to make $0.75 if the underlying moves as much as the investor hopes. The time of expiration for binary options is set at different time intervals throughout the day, such as expirations of 1 hour, 1 day, 1 month, etc. The short duration of these contracts makes them more attractive to speculators and risk takers. Here are the top 10 option concepts you should understand before making your first real trade: Options Resources and Links. Options trade on the Chicago Board of Options Exchange and the prices are reported by the Option Pricing Reporting Authority (OPRA): Investor Alerts and Bulletins. The SEC’s Office of Investor Education and Advocacy is issuing this Investor Alert to warn investors that fraudsters may conduct investment schemes through purported online binary options trading platforms. While some binary options are listed on registered exchanges or traded on a designated contract market that are subject to oversight by U. S. regulators such as the SEC or the Commodity Futures Trading Commission, respectively, this is only a portion of the binary options market. Much of the binary options market operates through Internet-based trading platforms that are not necessarily complying with applicable U. S. regulatory requirements. For a comprehensive overview of binary options, including information about investing in binary options that are subject to U. S. regulatory oversight, read our Investor Alert: Binary Options and Fraud . A binary option is a type of options contract in which the payout will depend entirely on the outcome of a yesno (binary) proposition. When the binary option expires, the option holder will receive either a pre-determined amount of cash or nothing at all.
Given the all-or-nothing payout structure, binary options are sometimes referred to as “all-or-nothing options” or “fixed-return options.” Typically, a representative of a binary options website will ask a customer to deposit money into an account where the customer can purchase binary options contracts. A customer may be asked to, for example, pay $50 for a binary option contract that promises a 50% return if the stock price of XYZ company is above $5 per share when the binary option expires. Be Wary of Sales Pitches. Representatives of binary options websites may use fictitious names and tout fake credentials, qualifications, and experience. They may misrepresent where they are calling from (for example, pretending that they are in the U. S.). Supposedly “unbiased” sources reviewing or ranking binary options websites may have been paid to promote or criticize particular websites. Fraudsters may “warn” you that the binary options website you are using is a scam in order to gain your trust and get you to deposit even more money in another website that they also run. If you are considering investing money with a binary options website, look out for these red flags: Unsolicited Offers. Unsolicited offers (you didn’t ask for it and don’t know the sender) to earn investment returns that seem too good to be true may be part of a fraudulent investment scheme. High Pressure Sales Tactics or Threats. Representatives of binary options websites may use high pressure sales tactics or even threats (for example, threatening to file a lien against your property) to swindle you. Identity Theft.
Representatives of binary options websites may falsely claim that the government requires photocopies of your credit card, passport, driver’s license, utility bills, or other personal data. Protect yourself and safeguard your personal information. Constant Turnover of Representatives. Be skeptical if the names of the persons you are dealing with at a binary options website seem to change frequently or if you are told your former “broker” has been fired. Issues with Withdrawals. Representatives of binary options websites may use delay tactics to hold up your withdrawal request until it is too late for you to dispute the charge(s) with your credit card company. The Fair Credit Billing Act (FCBA) provides consumer protections if you are charged for goods and services you didn’t accept or that weren’t delivered as agreed, but you must send a letter disputing the charges that reaches the creditor within 60 days after the first bill with the error was mailed to you. Also, be skeptical if someone tries to convince you to pay more money for a “premium” account with fewer restrictions on withdrawals. Credit Card Abuse. If you used a credit card to fund your account, keep an eye out for unauthorized charges on your credit card statements. Even if you signed a form purportedly waiving your right to dispute any credit card charges, report all unauthorized charges to your credit card company immediately. Government Impersonators. If someone claiming to be affiliated with the SEC contacts you and asks you to pay money to help you recover binary options investment-related losses, submit a Complaint Form to the SEC’s Office of Inspector General (OIG) or call the OIG’s toll-free hotline at (877) 442-0854. It’s important for all investors to know that the SEC never makes people pay to get their money back.
Violations of the Federal Securities Laws Involving Binary Options. In addition to perpetrating fraudulent investment schemes, the operators of binary options websites may be violating the federal securities laws through other illegal conduct, including: Offering or selling securities that have not been registered with the SEC (and no exemption to registration is available) Operating as unregistered broker-dealers Operating as unregistered securities exchanges and Making material misrepresentations to investors (for example, overstating the average return on investment, overstating the long-term profitability of investing in binary options over the course of multiple trades, or understating the risk of binary options trading). Furthermore, if any of the products offered by binary options trading websites are security-based swaps, additional requirements will apply. SEC Enforcement Actions Involving Binary Options . The SEC’s Division of Enforcement has brought charges against companies for failure to register the securities and failure to register with the SEC as a broker before offering and selling binary options to U. S. investors, as required. In SEC v. Banc de Binary , the binary options seller allegedly solicited U. S. investors through methods including YouTube videos, spam emails, and advertising on the Internet, and also communicated with U. S. investors by phone, email, and instant messenger. In In the Matter of EZTD Inc. , another binary options seller allegedly misrepresented the risk of investing in binary options sold on its trading platforms, including by stating on its websites that investing in the binary options that it offered and sold is profitable when, in fact, less than 3% of its customers in the U. S. earned a profit trading binary options sold by the respondent. If you purchase binary options from a firm that is not registered with or subject to the oversight of the SEC, you may not have the full benefit of the safeguards of the federal securities laws that have been put in place to protect investors. Some safeguards and remedies are available only to purchasers of securities in registered offerings . In addition, individual investors may not be able to pursue, on their own, some remedies that are available for unregistered offerings. Before investing, check out the background, including registration or license status, of any firm or financial professional you are considering dealing with through the SEC’s Investment Adviser Public Disclosure (IAPD) database, available on Investor. gov, and the National Futures Association Background Affiliation Status Information Center’s BASIC Search. If you cannot verify that they are registered, don’t trade with them, don’t give them any money, and don’t share your personal information with them.
Report possible securities fraud to the SEC. Ask a question or report a problem concerning your investments, your investment account or a financial professional. The new Firefox. Download Firefox — English (US) Your system may not meet the requirements for Firefox, but you can try one of these versions: Download Firefox — English (US) Your system doesn't meet the requirements to run Firefox. Your system doesn't meet the requirements to run Firefox. Please follow these instructions to install Firefox. Please follow these instructions to install Firefox. The best Firefox ever. Uses 30% less memory than Chrome. Truly Private Browsing with Tracking Protection. all things Firefox.
If you haven’t previously confirmed a subscription to a Mozilla-related newsletter you may have to do so. Please check your inbox or your spam filter for an email from us. Advanced Install Options & Other Platforms. Download Firefox for Windows. Download Firefox for macOS. Download Firefox for Linux. Download Firefox — English (US) Your system may not meet the requirements for Firefox, but you can try one of these versions: Download Firefox — English (US) Your system doesn't meet the requirements to run Firefox. Your system doesn't meet the requirements to run Firefox. Please follow these instructions to install Firefox. CFTC Fraud Advisories. The Commodity Futures Trading CommissionЂ™s (CFTC) Office of Consumer Outreach and the Securities & Exchange CommissionЂ™s Office of Investor Education and Advocacy are issuing this Investor Alert to warn about fraudulent schemes involving binary options and their trading platforms. These schemes allegedly include refusing to credit customer accounts, denying fund reimbursement, identity theft, and manipulation of software to generate losing trades. Binary options differ from more conventional options in significant ways. A binary option is a type of options contract in which the payout will depend entirely on the outcome of a yesno proposition.
The yesno proposition typically relates to whether the price of a particular asset that underlies the binary option will rise above or fall below a specified amount. For example, the yesno proposition connected to the binary option might be something as straightforward as whether the stock price of XYZ company will be above $9.36 per share at 2:30 pm on a particular day, or whether the price of silver will be above $33.40 per ounce at 11:17 am on a particular day. Once the option holder acquires a binary option, there is no further decision for the holder to make as to whether or not to exercise the binary option because binary options exercise automatically. Unlike other types of options, a binary option does not give the holder the right to purchase or sell the underlying asset. When the binary option expires, the option holder will receive either a pre-determined amount of cash or nothing at all. Given the all-or-nothing payout structure, binary options are sometimes referred to as Ђњall-or-nothing optionsЂќ or Ђњfixed-return options. Ђќ. Binary Options Trading Platforms. Some binary options are listed on registered exchanges or traded on a designated contract market that are subject to oversight by United States regulators such as the CFTC or SEC, respectively, but this is only a portion of the binary options market. Much of the binary options market operates through Internet - based trading platforms that are not necessarily complying with applicable U. S. regulatory requirements. The number of Internet-based trading platforms that offer the opportunity to purchase and trade binary options has surged in recent years. The increase in the number of these platforms has resulted in an increase in the number of complaints about fraudulent promotion schemes involving binary options trading platforms. Typically, a binary options Internet-based trading platform will ask a customer to deposit a sum of money to buy a binary option call or put contract.
For example, a customer may be asked to pay $50 for a binary option contract that promises a 50% return if the stock price of XYZ Company is above $5 per share when the option expires. If the outcome of the yesno proposition (in this case, that the share price of XYZ Company will be above $5 per share at the specified time) is satisfied and the customer is entitled to receive the promised return, the binary option is said to expire Ђњin the money. Ђќ If, however, the outcome of the yesno proposition is not satisfied, the binary option is said to expire Ђњout of the money, Ђќ and the customer may lose the entire deposited sum. There are variations of binary option contracts in which a binary option that expires out of the money may entitle the customer to receive a refund of some small portion of the depositЂ”for example, 5%Ђ”but that is not typically the case. In fact, some binary options Internet-based trading platforms may overstate the average return on investment by advertising a higher average return on investment than a customer should expect given the payout structure. For instance, in the example above, assuming a 5050 chance of winning, the payout structure has been designed in such a way that the expected return on investment is actually negative , resulting in a net loss to the customer. This is because the consequence if the option expires out of the money (approximately a 100% loss) significantly outweighs the payout if the option expires in the money (approximately a 50% gain). In other words, in the example above, an investor could expect, on average, to lose money. Investor Complaints Relating to Fraudulent Binary Options Trading Platforms. The CFTC and SEC have received numerous complaints of fraud associated with websites that offer an opportunity to buy or trade binary options through Internet-based trading platforms.
The complaints fall into at least three categories: refusal to credit customer accounts or reimburse funds to customers identity theft and manipulation of software to generate losing trades. The first category of alleged fraud involves the refusal of certain Internet-based binary options trading platforms to credit customer accounts or reimburse funds after accepting customer money. These complaints typically involve customers who have deposited money into their binary options trading account and who are then encouraged by ЂњbrokersЂќ over the telephone to deposit additional funds into the customer account. When customers later attempt to withdraw their original deposit or the return they have been promised, the trading platforms allegedly cancel customersЂ™ withdrawal requests, refuse to credit their accounts, or ignore their telephone calls and emails. The second category of alleged fraud involves identity theft. For example, some complaints allege that certain Internet-based binary options trading platforms may be collecting customer information such as credit card and driverЂ™s license data for unspecified uses. If a binary options Internet-based trading platform requests photocopies of your credit card, driverЂ™s license, or other personal data, do not provide the information. The third category of alleged fraud involves the manipulation of the binary options trading software to generate losing trades. These complaints allege that the Internet-based binary options trading platforms manipulate the trading software to distort binary options prices and payouts. For example, when a customerЂ™s trade is Ђњwinning, Ђќ the countdown to expiration is extended arbitrarily until the trade becomes a loss. Unregistered Transactions, Operations, Broker-Dealers, or Trading Exchanges Illegal Options Transactions. In addition to ongoing fraudulent activity, many binary options trading platforms may be operating in violation of other applicable laws and regulations, including certain registration and regulatory requirements of the CFTC and SEC, as described below. Certain Registration and Regulatory Requirements of the SEC. For example, some binary options may be securities.
Under the federal securities laws, a company may not lawfully offer or sell securities unless the offer and sale have been registered with the SEC or an exemption from such registration applies. For example, if the terms of a binary option contract provide for a specified return based on the price of a companyЂ™s securities, the binary option contract is a security and may not be offered or sold without registration, unless an exemption from registration is available. If there is no registration or exemption, then the offer or sale of the binary option to you would be illegal. If any of the products offered by binary options trading platforms are security-based swaps, additional requirements will apply. In addition, some binary options trading platforms may be operating as unregistered broker-dealers . A person who engages in the business of effecting securities transactions for the accounts of others in the U. S. generally must register with the SEC as a broker-dealer. If a binary options trading platform is offering to buy or sell securities, effecting transactions in securities, andor receiving transaction-based compensation (such as commissions), it likely should be registered with the SEC. to determine whether a particular trading platform is registered with the SEC as a broker-dealer, visit FINRAЂ™s BrokerCheck . Some binary options trading platforms may also be operating as unregistered securities exchanges . This would be the case if they matched orders in securities of multiple buyers and sellers using established non - discretionary methods. However, there are cases where a registered broker-dealer with a trading system or platform may legitimately have no obligation to register as an exchange.
Certain Registration and Regulatory Requirements of the CFTC. It is illegal for entities to solicit, accept offers, offer to or enter into commodity options transactions (for example, foreign currencies, metals such as gold and silver, and agricultural products such as wheat or corn) with U. S. citizens, unless those options transactions are conducted on a designated contract market, an exempt board of trade, or a bona fide foreign board of trade, or are conducted with U. S. customers who have a net worth that exceeds $5 million. To see the most recent list of exchanges that are designated as contract markets, check the CFTC website . There currently are only three designated contract markets offering binary options in the U. S.: Cantor Exchange LP Chicago Mercantile Exchange, Inc. and the North American Derivatives Exchange, Inc. All other entities offering binary options that are commodity options transactions are doing so illegally. Further entities that solicit or accept orders for commodity options transactions and accept, among other things, money to margin, guarantee, or secure the commodity options transactions must register as a Futures Commission Merchant. Entities that act as the counterparty (that is, they take the other side of the transaction from the customer as opposed to matching orders) for foreign currency options transactions for customers with a net worth of less than $5 million must register as a Retail Foreign Exchange Dealer. Because of their lack of compliance with applicable laws, if you purchase binary options offered by persons or entities that are not registered with or subject to the oversight of a U. S. regulator, you may not have the full benefit of the safeguards of the federal securities and commodities laws that have been put in place to protect investors, as some safeguards and remedies are available only in the context of registered offerings. In addition, individual investors may not be able to pursue, on their own, some remedies that are available for unregistered offerings. Ђў RememberЂ”much of the binary options market operates through Internet-based trading platforms that are not necessarily complying with applicable U. S. regulatory requirements and may be engaging in illegal activity. Ђў Do not invest in something that you do not understand. If you cannot explain the investment opportunity in a few words and in an understandable way, you may need to reconsider the potential investment.
Ђў Before investing in binary options, you should take the following precautions : 1. Check to see if the binary options trading platform has registered the offer and sale of the product with the SEC. Registration provides investors access to key information about the terms of the product being offered. You can use EDGAR to determine whether an issuer has registered the offer and sale of a particular product with the SEC. 2. Check to see if the binary options trading platform itself is registered as an exchange. To determine whether the platform is registered as an exchange, you can check the SECЂ™s website regarding Exchanges . 3. Check to see if the binary options trading platform is a designated contract market. To determine whether an entity is a designated contract market, you can check the CFTCЂ™s website . Ђў Finally, before investing, use FINRAЂ™s BrokerCheck and the National Futures AssociationЂ™s Background Affiliation Status Information Center (BASIC) to check the registration status and background of any firm or financial professional that you are considering. If you cannot verify that they are registered, donЂ™t trade with them, donЂ™t give them any money, and donЂ™t share your personal information with them.
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