Get started with 3 steps:

Choose a broker from the list below

If you are a US resident, you should select any of the brokers accepting US residents (under the US flag).

		Min. Deposit	Max. Returns	USA
		$200	91%
		$10	91%*
		$10	92%
						All brokers >>

*Amount to be credited to account in case of successful trade

Register a broker account

I personally use six different brokers for trading and recommend all serious traders to open a few accounts to different brokers in order to have a good variety of assets.

Start trading

Recommended reading:

• Guide: How to Start Trading Binary Options
• Binary Option Trading Strategies

Recommended reading:

• Best Binary Option Brokers 2016
• Boss Capital Review
• 24Option Review

A Brief History of Binary Options

Option trading has been around for quite some time. In it’s origin, it was strictly a means of investment reserved solely for the elite and was practiced with little to no regulations. This all changed when the Chicago Board of Trade created the first structured trading environment in 1971 as the Chicago Board Options Exchange (CBOE) was formed. It became the premier organization of it’s kind and to this date it is the biggest method of options trading worldwide.

Throughout time, regulations greatly improved thus increasing the parameter of options transactions. The Options Clearing Corporation (OCC) was then created as a safety net to oversee and ensure that investors would buy and sell their assets according to regulation. The OCC had the authority to enforce bans in instances of due negligence. Binary options would eventually evolve from these standard procedures with the intent of creating a more feasible investment protocol with minimal complications.

Although premature binary options were still being conducted over-the-counter, the new market was limited to the elite and had very little liquidation and no strict regulations. In 2007 however, the OCC changed the guidelines to allow binary options to be bartered on major stock exchanges. This was approved in 2008 by the US Securities and Exchange Commission (SEC) in order to legalize the classification of binary options as tradable contracts in foreign financial markets. In May of the same year, the American Stock Exchange became the first intercontinental exchange to publicly offer binary options. In June the CBOE followed their lead.

With the recent introduction of superior technology and highly sophisticated platforms and tools, there has been an explosion in binary options trading. The new internet rendition of binary options offers greater flexibility as well as an increased modification of fundamental assets; contract types; strike prices; and fulfillment times. These features enable more aggressive strategies to be comprised that propose maximum profits at minimum risk. This allows for new binary options brokers to enter the arena thus boosting highly improved and advanced platforms which then enable their constituents to achieve more fruitful trades.

In 2010, critical changes to the odds, risks, and fixed rewards now associated with binary options would further promote their reputation. From then on, important brokers started implementing policies to ensure that this brand of trade would become more user-friendly so that investors would be able to trade options from the confines of their homes as well when out and about. In essence, the sheer genius and beauty of the world wide web made it best for individuals to trade binary options anytime and from anywhere.

In present day, binary options are rapidly growing in popularity within the ever-changing investment industry. This is due to the many advantages of binary options in comparison with other, more traditional, investment options. Binary options offer a pre-ordained disbursement and damage format in addition to presenting investors with the convenience of creating vast trading positions in primitive assets using a limited cash deposit.

Simply by trading binary options, traders have vastly improved the possibility of making both invaluable and dependable trades. They can steadily increase their profits while concurrently minimizing their risk of exposure as they invest their time in studying and mastering the limitless array of binary option trading scenerios that are now available at their fingertips. With so many options, you can certainly appreciate the sudden evolution of binary options from complete obscurity to a sudden rise in fame.

Binary Options Trading Regulations

Even with the recent increase in binary options, many investors are still hesitant to invest in this market due to rising concerns over the regulations and security surrounding binary options trading. This heightened sense of caution is partially due to the lack of trust that investors have in the financial market. In light of recent financial crises and scandals that have erupted over the last decade in the U.S. (known as the most strictly regulated market worldwide), investors can now can be accused to being “too careful.” Regardless, many of the current misconceptions about binary options are largely due to a lack of understanding exactly how the binary option market operates.

The Regulatory Framework Surrounding Binary Options

Today, the Republic of Cyprus is one of the most popular locations for binary options brokers. Sadly, many investors tend to think that since Cyprus is one of the “undeveloped” economies in Europe. They see the country as unsophisticated with little to no financial regulations in place. In their distorted thinking, they feel that that binary options brokers chose this location as the base for their operations in order to avoid strict regulations, when in reality the reason is that taxes are much lower in Cyprus. In the U.K. corporate profits are taxed at 24% and this rate is even higher in the U.S., where companies can be taxed as high as 35%. However, taxes are only 10% in Cyprus. In light of this, it makes complete sense that many brokers choose to base their businesses in Cyprus. Many of you have probably noted that most binary options brokers refuse to accept clients from the American market as they do not wish to be taxed by the U.S. authorities.

There are many that would contend that the financial regulatory standards in countries like Germany and the UK are higher than those of Cyprus. This stems from the fact that they do not have a clear grasp on how the Eurozone market even works. The European Union (EU) parliament has issued the Markets in Financial Instruments Directive (MiFID) in order to harmonize the regulatory framework of the financial market within the Eurozone. The MiFId was designed to increase consumer protection as well as to integrate the various financial markets into a single market. It should be duly noted that Cyprus is in full compliance of the MiFID, under the Investment Services and Activities and Regulated Markets Law 144(I) of 2007.

Legal Protection Security

Thus, Cyprus actually holds a higher standard in fiduciary duties in terms of legal protection from rogue investment companies than the U.K., which is still not in full compliance of the MiFID. We need to consider that binary options are a recent financial innovation so there is little to no legal framework with which regulators can work. There reason there is very little legislation in existence to cover binary trading options is due to the fact that the OTC markets have historically been self-regulated. Only recently has the framework to regulate binary options been constructed. As a matter of fact, Cyprus is one of the first Eurozone members to in fact have a legal standard for binary options. With this legal definition, the regulatory authorities such as the Cyprus Securities and Exchange Commission (CySEC) is now empowered to act under the financial regulatory framework.

It might shock investors to know that binary options are in fact, not categorized as “financial options” under the U.K’s Financial Services Act, but instead they are regulated under the U.K. Gaming Commission where binary option trades are actually classified as “bets.” In the U.K. gambling debts are known as “debts of honor” and are not enforceable in the court system. You can imagine how difficult it would be to sue a U.K. based binary options broker for a “debt of honor.” when you have no legal ground on which to stand. Based on this premise, Cyprus is the best place for binary trading options in terms of legal protection.

Guide on the Basics of Trading Binary Options

We are thrilled to present to you this guide on the basics of trading in binary options in the industry. Throughout this page, we are going to take you through several facts about the binary options market that you need to learn prior to investing in the financial market. For the purpose of reference, you may need to bookmark this page as it will prove to be beneficial throughout your binary options trading career. Here is a list of what we are going to cover throughout the page:

• Understanding Binary Options
• The various types of binary options trades
• The basic binary options trading strategies
• The tools you will need while trading binary options
• Some of the things that you need to bear in mind while trading binary options
• Examples of trades in the financial market
• How to get started

Understanding Binary Options

What exactly are binary options? This is a question that has been lingering in the minds of many people in the binary options market. Well, this is a form of investment in the financial market, whereby the trader places a trade (a contract) that has a fixed reward as well as a fixed risk. These trades are referred to as binary options because they involve either one or the other choice. Similarly, these trades entail getting one or the other payout option, once the contract has expired. Some of the trading options in this industry include the up or down options and the touch or no/touch options. In computer language, the term binary refers to either 1 or 0.

An Example:

Suppose you would like to stake $100 on an asset whose current price is “$1612.75 and the expected payout is indicated as 80 percent. You need to stake the $100 on this position and set your preferred expiry period, to say one hour. If at the end of the one hour (the expiry period for your contract) the price of the asset goes up and you had predicted that it would go up, you will have won the position. In this case, you will get the amount you staked on the position, $100, and an additional 80 percent of the staked amount. In total, you will get $180 from this trade. However, traders need to note that the magnitude by which the price of the commodity move will not determine the payout amount. If you had predicted that the price of the asset will go up and drops instead of going up, by the time the contract expires, you will have lost the trade and consequentially the money you staked on the position.

The Main Components of This Trade

All the contracts/trades that you will be placing in the binary options market will always have three key components, namely:

• The strike price
• The expiry time
• The Payout percentage

The strike price in this case is the price of the commodity you have chosen to trade in at the time you open the trade. In the above mentioned example, the strike price of the trade is $1612.75. This is the price of the asset you are trading in at the time you open the trade. It is the price value that will determine whether you have won or lost the position.

The expiry time is the period that your placed contract is expected to expire. It is the period between the time you place the trade and the time it expire. For most brokers in the industry, the trader is allowed to choose his or her preferred expiry period while opening a trade. The expiry period could be as short as 60 seconds or as long as days or even months.

The payout percentage is the predetermined amount that the broker is offering to pay, if you win the trade. In the above mentioned example, the payout amount was 80 percent. In this case, you will get 80 percent of the staked amount, in addition to the staked amount, if you win the trade. However, you will lose the staked amount if you lose the position in this example. There are brokers in the industry that return a certain percentage of the staked money, if the trader loses the trade. This amount could be as much as 10 percent of the invested money, but is dependant on the trade and the binary options trading platform that you are using.

The Various Types of Binary Options Trades

Currently, there are various types of binary options that traders may trade on their preferred binary options trading platforms.

The Basic Binary Options Trading Strategies

The Tools You Will Need While Trading Binary Options

We have compiled some information on some of the most beneficial binary options trading tools on this page.

Some of the Things That You Need To Bear in Mind While Trading Binary Options

If you have been reading this page, you must have learned the basics of trading binary options. Before venturing into binary options trading, there are various things that you have to bear in mind, some of which include:

• There brokers with a minimum investment amount of as low as $10
• Trader’s risk is limited to the amount he or she has staked in a trade
• You only lose the amount you hade staked in a position, if you lose
• You do not own the asset you have used to open a trade; instead you simply bet on the price movements of the price.
• Trading binary options is comparatively risky. Therefore, invest what you can afford to lose.
• There are numerous trading options in the industry, the commonest and easiest of them being the Up / Down trading option.

In all cases, the payout you will get after winning a certain trade is stated beforehand. Since the risk you incur while trading binary options is limited to the amount of money you put at stake, you should only risk what you can afford to lose in any position.

The Up/Down Trading Option

The Up/Down is among the easiest trading options in the binary options industry. Just like the name suggests, this options entails clicking on either the UP (call) or the Down (put) button, in accordance with the direction that you believe the price will take. Let us look at an example where Gold is the asset you would like to open a trade on. Most binary options brokers will feature a graph on each asset listed on their platform. In the case of Gold, the graph provided will have a line to indicate the movement of gold prices over time. From the provided graph, you can see how the price of Gold ha been changing over time. As such, you can decide on the probable direction that the price will move in the near future. It is on this basis that you make your prediction on whether the price o Gold will rise or fall in the near future.

If you believe that Gold will appreciate in value in the near future, you should click on the ‘Call’ button to open a trade. You should then indicate the amount you would like to stake in the trade and your preferred expiry period from the dropdown menu provided by the broker and then place the trade. If you believe that the price will drop in the near future, you should click on the ‘Put’ and indicate the amount you would like to stake as well as your preferred expiry period before placing the trade.

For many brokers in this industry, traders have an array of expiry period options to choose from. Some binary options trading platforms are offering 5 seconds, 12 seconds expiry periods and an array of other short-term expiry periods. Additionally this option also allows traders to incest in long-term options, such as the trades with expiry periods of days or even weeks. It is at the expiry time that the broker determines whether you have won or lost the trade. This is done by comparing the price of the chosen asset at the time of expiry of the contract to the strike price of the asset. If you had chosen ‘Call’ and the price of the asset is higher than the strike price, at the end of the contract period, you win the trade.

Examples of Trades in the Financial Market

Example 1: Using the Up/Down option to trade Google Stock

Assuming that Google was performing fairly well and you expect that the Google stock will be trading above $672.10 by 4.00pm Est. time. You should then open a position based on this conviction. To make this forecast, you can make use o the market reviews and trade signals provided by your broker. Alternatively, you may also analyse the market on your own and read the charts on the binary options trading platform you are using. Based on such information, you stake $1000 on the Google stock asset and set the expiry time to correspond to sometime after 4.00pm Est. For the purpose of this example, we are going to assume that you broker is offering a payout of 70 percent on this asset if you win and a rebate of 10 percent, if you lose.

If after the contract period has expired the Google stock asset has appreciated to a value that is greater than $672.1.00 as you had predicted, you will earn $1700. This includes the $1000 you had staked in the trade and the 70 percent payout, which translates to $700. However, if the price of Google stock goes against your prediction, you will get a 10 percent rebate from the broker. As such, you will get $100, which is 10 percent of the staked amount. In this case, you will lose $900.

In this case, the $672.10 price of the Google stock asset is referred to as the strike price. Now that you had predicted that the price will rise, this is a ‘call’ trade. The $700 that you earned above the invested amount is the payoff; hence your profit for this trade. In some cases, some binary options brokers will offer a rebate amount. This is the amount that the broker will reimburse to you if you lose the trade. In this example, the rebate is set at 10 percent; hence is $100. However, you need to understand that not all binary options brokers offer a rebate for their traders.

As opposed to this example, you may also decide to bet in the opposite direction, if you believe that the price of the Google stock will drop in the near future. In this case, you will have to place a ‘Put’ trade, but the payout will remain to be the same if your prediction is right. Similarly, the loss will also be the same if your prediction is wrong.

Example 2: Using Touch Trade Options to Trade Gold prices

With binary options, it is possible for traders to take advantage of gold price movements to make a profit. In this example, we will use the touch trading options to predict price movements of the gold asset. In this regard, the price of Gold ha to hit the touch price for you, the trader, to win the trade. With the conviction that the price of Gold will hit the $1617.40 mark by 4.00 pm, a trader invests $100 in this trade using the touch trading option. For the purpose of this example, we are going to assume that the payout offered by the broker is 70 percent if the trader wins the trade and a rebate of 15 percent if the trader loses the trade.

If by the expiry period the price has touched the touch price indicated by the trader, the trader will have won the trade. In this case, he or she will get $170, which includes the $100 staked in the positions and the payout amount, which is $70. If the price of Gold does not hit the touch price, the trader will have lost the trade. As such, he or she will only get the rebate amount, which is $15 in this case. As a result, the trader will lose $85.

With the touch trading options, the trader is required to indicate the touch price as well as his or her preferred expiry period before placing the trade. Suppose the trader selects $1617.40 as the touch price and 4.00pm as the expiry period. After placing the trade, bad news regarding the value of the dollar breaks out. This will drive inflation fears and force oil and gold prices to rise. As such, the price of gold will hit the touch price. Although not all brokers in the industry offer the touch trading option, they are the second most popular binary options trading option.

A General Binary Options Trading Example

The following general trading procedure should be applied:

• To begin with, you need to select an underlying asset to trade in, such as a currency pair, gold or oil.
• You then need to select your preferred expiry period from the options provided by your broker; this could be 60 seconds, 1 hour, a day or a week.
• Indicate the amount of money you would like to invest in the position, for instance, you may choose to stake $10.
• Predict the direction you think the price will move towards; up or down. This is done by selecting the up or the down option.
• Prior to submitting your request, you should check the payouts for the position if you win or lose the trade.
• Now click on the apply button to place the trade.

While trading binary options, it is not possible to lose more money than you have staked in the open position(s). Again, it is not possible to make more profit than the indicated payout percentage on any trade you have placed. For most brokers, the payouts offered to traders after winning a position ranges between 70 and 85 percent. Although some brokers do not offer rebates, there are those brokers that offer rebates of up to 15 percent of the staked amount.

What You Have to Remember While Investing In Binary Options

Here are a couple of things that people need to know about the binary options trading industry:

• As opposed to Forex trading, traders in binary options are not restricted by leveraging
• The profit or lose you will make from any trade is known before hand and you cannot lose more than what you have invested in a trade.
• The magnitude by which the price has moved will not affect the much profit or loss you make while trading binary options.
• The amount of payout on any trade is clearly indicated
• The majority of brokers we have listed will offer traders an early closure option. This feature allows traders on their platforms to close the trade at any time, before the expiry time, when they find the price appealing. This allows traders to make an early exist from any trade and to minimise losses.
• All the brokers we have listed offer a payout of between 70 and 85 percent on various assets.
• Trading binary options is not associated with any hidden costs and fees
• The trade entails ‘one or the other’ option, hence is referred to as binary
• Opening a trade on an asset does not mean that you buy it; you are just investing on the price movements of the said asset.

How to Get Started

Since this page is the basic overview of investing in financial market through binary options, you should navigate to the page that focuses on how to invest in binary options. For more information on how to start trading in binary options, the following tutorial can be of great help:

• How to Begin Trading Binary Options

Binary Options Trading for Novice

To succeed in trading binary options, you will also need to master how to analyse the market and read graphs and charts offered by your broker.

References and Further Reading:

1. Rethinking risk management (RM Stulz – Journal of applied corporate finance, 1996)

2. One-touch double barrier binary option values (CH Hui – Applied Financial Economics, 1996)

3. Mathematical modeling and methods of option pricing (L Jiang, C Li – 2005)

4. Static hedging of exotic options (P Carr, K Ellis, V Gupta – The Journal of Finance, 1998)

5. A continuity correction for discrete barrier options (M Broadie, P Glasserman, S Kou – Mathematical Finance, 1997)

6. Binary option pricing using fuzzy numbers (A Thavaneswaran, SS Appadoo, J Frank – Applied Mathematics Letters, 2013)

7. Interpreting prediction market prices as probabilities (J Wolfers, E Zitzewitz – 2006)

8. On pricing barrier options (P Ritchken – Currency Derivatives: Pricing Theory, Exotic Options …, 1998)

9. Dynamic hedging: managing vanilla and exotic options (N Taleb – 1997)

10. Binary options: fixed odds financial bets (H Raw – 2011)

11. Option hedging for semimartingales (M Schweizer – Stochastic processes and their Applications, 1991)

12. Option Trading, Price Discovery, and Earnings News Dissemination* (KI Amin, C Lee – Contemporary Accounting Research, 1997)

13. An empirical reexamination of the impact of CBOE option initiation on the volatility and trading volume of the underlying equities: 1973–1986 (VK Bansal, SW Pruitt, KC Wei – Financial Review, 1989)

14. Constraint logic programming and option trading (C Lassez, K McAloon, R Yap – IEEE expert, 1987)

15. Hedging by sequential regression: An introduction to the mathematics of option trading (H Föllmer, M Schweizer – Astin Bulletin, 1989)

16. Short term impact of option trading on underlying securities (MM Whiteside, WP Dukes… – Journal of Financial …, 1983)

17. Option trading and individual investor performance (R Bauer, M Cosemans, P Eichholtz – Journal of banking & finance, 2009)

18. Option trading and the relation between price and earnings: A cross-sectional analysis (LCJ Ho – Accounting Review, 1993)

19. Hedging by sequential regression: an introduction to the mathematics of option trading (H Föllmer, M Schweizer – Astin Bulletin, 1988)

20. The Interrelation of Stock and Options Market Trading‐Volume Data (JH Anthony – The Journal of Finance, 1988)

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