By Lucy Cain
Binary options have not been around for all that long. After the SEC ruled that they could be traded in the United States, several binary option brokers sprung up offering them to customers in the U.S. It is a relatively new industry and one that investors have flocked to as an alternative to conventional stock trading.
For those not already familiar, binary options are simply an option that has a fixed payout as opposed to a payout determined by the magnitude by which the underlying security is traded. If you look consider a regular stock option, the price is determined by how much the stock goes up or down. For instance, Wal-Mart stock could fluctuate a few dollars per day which would also fluctuate the value of any option for Wal-Mart stock. A binary option is fixed and pays when a stock hits a specific performance indicator. For example, you could purchase a binary option that pays $100 when the price of Wal-Mart stock hits $50 per share. The value of the binary option is valued at $100 once Wal-Mart hits that specific price point.
Some of the brokers who offer binary options are regulated by CySEC, the financial regulatory arm of the Cyprus government. Others are fly by night companies who spring up and are gone as quicker than they arrived. Binary options have grown in popularity and some of the original companies have stood the test of time (a short time) to become established with investors and others in the world financial market. For those who want to remain a player in the binary options market, they must be willing to be transparent.
That is exactly what some brokers are currently doing. In January, one of the world’s largest trading companies, Banc de Binary, announced that they will seek to become a regulated broker in the United States. There is currently no official regulations for binary option brokers in the United States. According to their CEO Oren Laurent, they are working with the United States Commodity Futures Trading Commission to become a regulated broker. In fact, Banc de Binary was the first standalone binary option broker to be licensed by CySEC and has always been on the forefront of transparency.
So what exactly is the future of binary options? For an industry that has only been around for four to five years and has increased in popularity at one of the fastest paces than any other traded commodity, it is safe to say that they will be around for years to come. Although regulated in many countries, the top companies will be those who seek regulation everywhere it is available. For some such as Banc de Binary, seeking regulation where it is not even offered is a clear sign of transparency and a clear indicator that they want to be part of the future of binary option trading.
About the Author
Lucy is a graduate of the School of Business at Southwest Florida College. She is originally from Austin, Texas but spends her time traveling around the country. She has been a freelance writer since 2011 and her specialty is in forex currency trading and binary option trading. She has worked in the finance field since 2008 and has written numerous articles on alternative forms of investments.
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