Exchange Traded Binary Options in Perspective

Novices to the online trading arena have most certainly come across the term binary options. For some, it evokes negative connotations, and for others it is a jackpot waiting to be hit. Some investors are nonplussed by the concept, but everyone recognizes that binary options trading is real, and the profit potential is substantial. To gain a better understanding of precisely what binary options trading is all about, it’s imperative to separate fact from fiction. Equally important is the issue of regulated binary options brokers and a functional binary options trading platform.

Introducing Exchange Traded Binary Options

Many investors group all binary options together in the same basket of traded possibilities. However, there are unique elements to different types of binary options. For the most part, all binary options share one commonality: you’re either in the money or you’re out of the money. These all or nothing options are the common denominator with binary options, but the unique characteristics of individual binary options set them apart from one another. As mentioned earlier, regulation is an important aspect to consider when trading binary options online. Investors are cautioned against going with brokers that promise massive returns with little or no risk involved.

Many unregulated binary options brokers, or lightly regulated brokers, are often associated with risky trading practices. As a result of these fly-by-night operations, various regulatory bodies came into being to oversee the operation of binary options brokers around the world. Traders have long been calling for greater transparency, credibility and accountability in respect of their preferred binary options brokers. Regulation provides precisely that. Many disreputable offshore binary options firms have been marketing their products to unsuspecting investors, often with dire consequences for traders. As a result of complaints, regulation gained traction with lawmakers in respect of this new investment possibility. Midway through 2013, the CFTC as well as the SEC issued a fraud advisory to investors. The advisory also provided valuable information regarding the characteristics of legitimate binary options brokers.

Legitimate binary options brokers only allow traders from designated countries to trade binary options with their platform. As an investment vehicle, binary options provide quick and easy access to the global markets with little or no experience required. During the entire trading process, traders will have total control over the level of risk that they are exposed to. In other words, you can limit your liability to the investment you make. Regulatory bodies stressed that traders should look for 5 important features in any binary options trading platform. These include the following:

1. A Set of Rules is an important consideration since changing goalposts cannot possibly be of any benefit to traders. It is important to know precisely what benefits are possible when trades go well, and what potential risks there are when trades do not end in the money. Any binary options broker that changes the rules and guidelines at will, should be discounted from consideration.
2. Maintenance of an Unbiased Marketplace simply means that sellers and buyers should be matched in a manner that is unbiased. Employees of the binary options broker should not be able to take positions in the markets.
3. Full Transparency and Accountability at All Times is an important consideration. These exchange traded binary options rely on complete transparency and price discovery.
4. Segregated Funds are an important consideration. Traders’ funds and the binary option broker’s funds should be separated and held in different accounts. When binary options traders want to withdraw their funds, the process should be made as simple as possible and expedited accordingly.
5. Regulation is listed at number 5; however it is possibly the most important aspect of selecting a binary options broker. Depending on which jurisdiction you fall under, regulation is an absolute priority. Many leading binary options brokers are licensed and regulated by CySEC. In any event, be sure to establish precisely which regulatory authority is responsible for the binary options broker you have selected.

Avoid Problems by Choosing Binary Options Brokers Carefully

Careful selection of a reputable binary options broker certainly has many benefits. Traders will be able to avoid all sorts of problems by going with a licensed, regulated and credible binary options broker. Some of the problems that traders have reported over the years include the following:

• Promises of being credited with bonus funds, but never receiving them
• Poor customer service and an inability to have queries resolved amicably
• Being coerced into depositing additional funds and not being able to withdraw funds
• Potential for identity theft by employees of binary options brokers in unregulated markets
• Unregulated brokers are not subject to oversight and their trading platforms may be manipulated to intentionally lose traders money
• Binary options brokers may be operating in direct contravention of existing laws of that country

Given the huge potential to generate profits with binary options trading, there are many opportunities for shady characters to enter the trading arena. With proper oversight, traders can rest assured that they are in safe hands at their preferred online broker. Regulation and licensing is easily checked and verified and above board brokers will openly, and proudly, display their credentials. Investors can easily validate the claims of binary options brokers by contacting the regulatory body, reading external reviews and contacting the customer support center of the broker itself.

Author Bio

Orit Nathan Mahalal is Banc De Binary’s Head of Content, an accomplished writer and social media expert. At Banc De Binary, Orit heads a team of copywriters who, under her direction, create content for all aspects of the business, internal and external. Orit’s key role is to ensure that only top quality, superior copy enters the channels and that Banc De Binary stays at the forefront of the binary options industry.