In the internet age, many businessmen and traders are being attracted towards a new online trading trend, which is called binary options. The binary options trading is becoming more popular, as it brings a quick earning opportunity. In many cases, a trader can make profits even within an hour.
Binary options has two possible outcomes – “in the money” and “out of money”. For guessing the correct market movements, a trader can earn up to 80% as in the money. On the other hand, if you fail to judge the market movements correctly, you may lose up to 95% of your investment, if you are assured of an out of money reward of 5%. In general, out of money reward varies between 5% and 15%.
In binary options trading, you do not purchase any asset but can make money by predicting the asset’s movement in the financial market correctly. Since the actual asset is not traded off, many may raise a concern over the sanctity of binary options trading.
Legitimacy of Binary Options
The binary options or digital options have been around for many years now, but previously the transactions used to be carried out over the counter. It’s just a few years back when binary options have been started executing in the online environment, and it started gaining more popularity among the worldwide traders and investors.
However, binary options trading is legal today with several special bodies forming rules and regulations to help execute binary options trading in a legally valid environment. Earlier there was no controlling authority when binary options trading were executed over the counter until 1973, when Chicago Board Options Exchange (CBOE) was founded. This was the first attempt to provide traders with a proper trading platform to execute binary options transactions. Still the CBOE functions as the largest body supervising trading options.
After CBOE, the Options Clearing Corporation (OCC) was created to form more advanced rules and regulations to ensure that all binary options trades are executed diligently. The OCC supervises the buying or selling of options and maintains that all traders must not violate the set rules and regulations of binary options trading.
In the year 2008, the OCC amended the rules with respect to binary options trading, allowing the options trading on major markets. Consequently, major markets started listing binary options as a tradable contract. The American Stock Exchange became the first stock exchange to enlist binary options trading. So, binary options is a legal way of investing in assets, however, the legitimacy of a broker needs to be ascertained through which one wants to trade binary options.