How To Choose The Best Binary Options Platform
24Option Is A Top Platform For Binary Options
Binary Options Market Analysis
Trading Binary Options Online
Binary options have become a popular way for trading the international stock, forex and futures markets. There are two main reasons for this; simplified analysis and simplified payouts. Because of the win/lose payout structure it easy for traders to speculate financial markets without the need to worry about margin calls, delta, theta or volatility. All it takes is a prediction of whether the market is going to be higher or lower than where it is now. If you think the market is going to higher in one hour, one day or one week from now you would buy a call. If you think the market is going to go lower you buy a put. If the market moves in your predicted direction and closes in the money by as little as one penny or tick (depending on the underlying) you win the maximum payout. This is significantly different than standard equity options, forex and index options because the values of those trades depend heavily on the strength of the movement and the time it takes to get there.
How Binary Options Trading Works
In standard options trading the price of the underlying is governed by the Black-Scholes model and is affected by volatility, time decay and delta. For these reasons the value of your options can decrease even if the underlying asset moves in your predicted direction. This is why options trading is so difficult and why so many traders get washed out of the market. This is not the case with binary options. Each time you enter a binary trade you decide how much the option will cost. If you predict the S&P 500 the is moving up from the 1400 level and you want to trade $100 then that is what an S&P 500 1400 call will cost, $100. If you want to trade $2000 then that is what it will cost. The payout, which varies from broker to broker, will be a percentage of your trade and payable at expiration providing the underlying asset closes in the money.
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Binary Options Regulation
Binary Options are a relatively new trading vehicle. They have been available for decades in one form or another but the rise of the internet has brought them into the spotlight. Widely viewed as pure gambling, the industry has been receiving approval and regulation from many sources. Most notable, the Cyprus SEC made the first move. They recognized binary options as a financial instrument and spearheaded the campaign to impose regulation on the market. Now, there are dozens of CySEC regulated binary options platforms.
In the US the Commodity Futures Trading Commission (CFTC) has entered the fray as well. Their mandate is to protect the people of the US from manipulation and fraud by commodity, futures and options exchanges. They have enacted a ban on on trading "off exchange" options, including binary options, except where exempted. From what I can tell, and I am still digging into the details, some assets are considered to be "standardized" and exempt from the ban. Recently, Intrade, an Ireland based binary options platform, was shut down due to failure to remove access to some binary commodities and futures options deemed to fall under the ban.
Top Tips For Choosing A Binary Options Broker
- US Approved - The binary options market is an international industry with brokers and platforms available online through your computer. The industry has some regulation, primarily in the US and Cyprus, and not all brokers are cleared for US traders. The number one thing you should look for in a binary options broker is if it is available to US based traders. Some brokers are fully approved and some only offer limited assets. One broker I know is approved for US citizens to trade equity options but not forex or commodities.
- Account Safety- Not all brokers operate the same way and part of that includes how they handle your money. The regulated, and best, platforms hold all money in a trust account and are monitored by third party oversight to ensure that the rules of fair play are followed. You should also look into how pay outs are handled. Some brokers have maximum withdrawal amounts and limits to monthly withdrawal. If you are not sure you can get your money out it is probably not a good broker to choose.
- Asset List-Make sure that the underlying assets you want to trade are available on the platform. Not all brokers offer the same assets and some brokers may offer an asset that is not approved for US traders.
- Expiration-Binary options, except for US exchange listed binary options, have different expirations than the US equity options which expire on the third Friday of the month. Binary options expirations can range from 60 seconds from purchase all the way end-of-month expiration. Be sure that you understand how the expirations work on your chosen platform and that they match your trading style and needs.
- Types Of Binary Options- As the industry has matured different types of binary trading has been introduced. Originally there were just high/low options. This in when you trade positions based on whether you believe the underlying asset will close higher or lower than the present level. There are also one touch binary options, under/over options, inside and outside range options. Be sure you know what you are trading and if the types of trades you want to make are available on your platform.
- Trader Education- One of the most important features of a binary options broker is its educational resources. Only the best, most serious binary brokers offer adequate resources. Some better than others. Check and make sure that the website and its resources can answer your questions and provide you with ongoing education.
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