Binary Options - What are they and how do they work?

ForexVerified

Private, 1st Class
Messages
582
Hello Everyone, I am a binary trader from January 2012. This business is very unique as it is very simple to understand and return is massive and sometime about 500% on your initial investment (depends on your broker). To trade there are two basic types of binary options. The first, called a call, is bought when the trader expects the price of that option’s underlying asset to go up. If a given trader expects the price of that option’s underlying asset to fall, they would buy a put. With each binary option, there are two key pieces of information to remember. First is the strike price. This price level determines whether an option expires in the money or out of the money. Second is the date and time of expiry. With binary options, expiration can be as short as a few minutes and as long as several months. I am going to list some of the advantages as well as disadvantages of trading binary options.

Advantages

Your risk is defined which means you could only loose whatever you have invested.
No margin call or trade closure by broker before expiry time.
High return in very short time.
Profit from rising and falling market.
No spread so you could win even with .1 pip

Disadvantage

All most all of brokers offering binary options are not regulated.
You could loose all of your investment in few minutes.
Most of binary option brokers are illiquid and are bucket shops.


Things to consider before choosing option broker.

Till today option brokers are not regulated but some brokers are making efforts to be regulated by Cyprus Securities and Exchange Commission as most of brokers dwells in Cyprus. Only one broker is regulated by ASIC but my personal experience with them is not very good. You could search about them online. Do not invest your money if your broker claims following things :

We are market makers, Some OB (option Brokers) claims to be Market maker which is totally wrong and misleading information to traders.

If they claim to buy binaries from bank and sell them to you in which they get commission. No bank offers binary trading except some bank offers vanilla option but they are totally different from binary trading as their time period is monthly or at least weekly.

If they claim to be regulated by National Swiss Bank. Since when SNB become regulating agency for OB.

If they claim to be regulated by Reuters. WRONG ! Reuters provides platform for interbank trading as well as provides real time market data feed for various assets and is not a regulating agency.

Some broker write this statement "option price/quotes that is offered by us is not necessarily the real time of the underlying asset but rather the price that this broker is willing to offer the relevant option" This statement means that you may or may not get fair market price during expiry, fair market price is very important because you may loose big chunk of money with just with 0.1 pip although the real market price was in your favour.

Conclusion:

I have personally tried 5 different brokers (SS are available if anyone like to cross examine) and have concluded that till now OB don't offer transparency, fair option expiry price as well as funds security. You can pick different brokers and compare their expiry price and all of them would be having different expiry rates, even though most of them gets their feed from Thompson Reuters. We as a traders have to wait little more time for this business to develop to a point where we have sense of security and freedom to trade without fear.

Please feel free to comment since Sharing is caring.

Till next time.
Nicely explained. Thank you.
 

sofaking

Private, 1st Class
Messages
51
It's unbelievable the amount of scammers and con-artists there are in the Binary Options world. From brokers, signal services, review sites etc it seems you can trust absolutely nobody.
Had a guy from one of the brokers call me this morning suggesting that I invest $10,000 and place it on Alibaba to rise in value by the end of the day (he say it was a sure thing due to the positive news regarding that company yesterday). Obviously I didn't send his any money. And yes, Alibaba dropped like a stone today. :p
 

ijak

Private, 1st Class
Messages
63
It's unbelievable the amount of scammers and con-artists there are in the Binary Options world. From brokers, signal services, review sites etc it seems you can trust absolutely nobody.
Had a guy from one of the brokers call me this morning suggesting that I invest $10,000 and place it on Alibaba to rise in value by the end of the day (he say it was a sure thing due to the positive news regarding that company yesterday). Obviously I didn't send his any money. And yes, Alibaba dropped like a stone today. :p
intresting, i am curious when i can get a free signals like that,. mind to share your binary broker that called you?
so how the story will be, if you decide to deposit any amount and reverse his suggestion by open a put binary trade?
i never traded with binary brokers that using spot options platform. and stick with better binary brokers that have been online for years like bet on markets.their rise fall contract offer better payout then any binary brokers out there.around 80-104% payout and average in 85-94% in normal and not volatile market

yes they are sometimes play with prices , especially when your bet will expired soon, and the price is around the entry spot for few pips.
but if you wanna fair binary brokers , i think they are the one.

second broker i used was hirose uk binary and i traded 30minutes contract there. they are fair i think, but they have limited instruments and charge some spreads in EURUSD , XAU and XAG instruments
one of binary broker that offered highest 80-90% payout

tried IG demo account twice, and their platform, is hard to understand. too much complicated i think

however, i never deposit too much in binary and hirose uk , always under $100 because i dont think binary is for serious money. forex trading offer better odds if you find a good and a reputable brokers,either it is ECN ,STP, market makers, or bucketshop
 

sofaking

Private, 1st Class
Messages
51
intresting, i am curious when i can get a free signals like that,. mind to share your binary broker that called you?
so how the story will be, if you decide to deposit any amount and reverse his suggestion by open a put binary trade?
i never traded with binary brokers that using spot options platform. and stick with better binary brokers that have been online for years like bet on markets.their rise fall contract offer better payout then any binary brokers out there.around 80-104% payout and average in 85-94% in normal and not volatile market

yes they are sometimes play with prices , especially when your bet will expired soon, and the price is around the entry spot for few pips.
but if you wanna fair binary brokers , i think they are the one.

second broker i used was hirose uk binary and i traded 30minutes contract there. they are fair i think, but they have limited instruments and charge some spreads in EURUSD , XAU and XAG instruments
one of binary broker that offered highest 80-90% payout

tried IG demo account twice, and their platform, is hard to understand. too much complicated i think

however, i never deposit too much in binary and hirose uk , always under $100 because i dont think binary is for serious money. forex trading offer better odds if you find a good and a reputable brokers,either it is ECN ,STP, market makers, or bucketshop
It was No. 1 Options. Very scammy, I'd advise you to avoid them.
 

DANMIKDAL

My mommy is sad that I grew up to be a spammer.
Messages
1
Are you a Trader?, Don´t you have any money for investing?, Then Ayrex.com it´s your internet site. (large amounts of spammy text deleted)

Please don't post advertisements or affiliate links in this thread. Spam Cat is hungry and is always on the prowl.

Spam Cat was hungry this morning and is glad you were too stupid to read the instructions. Spam Cat thinks he'll microwave you before eating you.


 

tomworn1

Banned spammer for 24Option
Messages
6
Binary options in 80% scam so that is very likely for a new trader to open an account with a scam broker. I been trading both forex and binary and decided to be more involve with warning people from being scammed.
 

Pharaoh

Colonel
Messages
19,743
Binary options in 80% scam so that is very likely for a new trader to open an account with a scam broker. I been trading both forex and binary and decided to be more involve with warning people from being scammed.
I think binary brokers likely to scam you is significantly above 80%.
 
Top