Binary Options Trading In USAComplete Guide For USA Traders-Binoption

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Binary Options Trading In USA – A Complete Guide For The USA Traders

Binary Options trading in the USA is quite different from other countries. Not only the regulation but also other information like brokers, trading time frame, assets list, etc. are entirely different from another region.

In the trading world, binary options trading is not a new concept. Moreover, the trading type is legal in the US, although not completely. But, trading with a legitimate offshore broker or US located broker is compulsory.

In 2008, binary options launched for the USA retail traders. Moreover, trading exotic options is possible on a wide range of trading instruments.

So, this article is a strong source for existing US traders and also them who want to trade binary options shortly. We will cover this article on necessary materials like regulatory bodies, how to choose the right broker, when to open a trade, and others.

Now, we will start with a short introductory phase for them, who are not familiar with the term of binary options.

Binary Options Trading Definition

Trading binary options is a simple and easy way to make money. The simplicity is you know exactly what will happen before placing a trade. It has two outcome- all or nothing.

Furthermore, it illustrates that whether you will earn money if you make the right prediction, or will lose all. At the same time, the payout percentage will depend on the asset types, expiry time, and strike price.

But you can see the approximate payout percentage rate from the asset list. Remember, “greater the price movement, higher the payout”.

To know more about binary options, you can read what is binary options article.

Eventually, the above-mentioned article is designed for novice traders.

Recently, the US market is expanding after following regulatory rules by SEC and CFTC.

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As we mentioned before, binary options is not completely legal for the USA traders. But people trade binary options with the help of US regulated brokers. As a trader, you can only trade those assets which are listed on the exchanges found in the US market.

Here, it needs to mention that both offshore and domestic brokers can run their service if they follow proper rules and regulations. However, as per the rule of CFTC , trading with an offshore broker will consider as online gambling. So, online gambling is illegal and prohibited for traders.

In 1973, first Binary Options was introduced in the Over the Counter Market (OTC). At the first time, this contract was widely traded by institutions.

We will discuss the regulation information later in this article.

Why Regulation Is Important For Binary Traders

As binary options are not accepted by many countries, so it is important to verify the platform before investing money. Furthermore, the regulation is not only essential but also required for traders.

To make trader’s every transaction safe and secure, brokers need to follow rules and regulations allocated by the regulatory body.

At the same time, to be a regulated broker, you have to collect licenses from regulatory bodies.

The fact is, not every country has the same regulatory rules. So, apart from the safe transaction, a regulated broker will also give you safety guard on funds, traders confidential information, offers, and many more.

It is recommended for all traders not to attract by lucrative offers and bonuses offering by brokers. On the other hand, a regulated broker will so give you peace of mind.

Moreover, a trader will place their trades without any stress of any illegal and fraudulent actives using their funds. A regulated broker will also offer you experienced trading professionals with dedicated customer support.

In the next phase, we will talk about some factors that help you choose a broker.

Signs Of A Scam Broker

Finding a scam broker is not a hard task for traders. You can identify an unregulated broker’s platform with a zero effort. Simply, you have to identify some factors to see either the broker platform is trusted or a scam.

Here, we will disclose some points to make your task easy. Go through these below points to stay informed:

  • High payout percentage with a guarantee
  • The expiry time is very limited
  • Try to build trust with a high-pressure sales speech
  • No risk promises
  • Interbank market trading
  • Exclusive offers

Be aware of these scammers who will try to charm you with their exclusive offers and promises. Moreover, you will find any detailed information through websites.

So, try not to take a questionable investing decision.

How To Choose A Regulated Trading Platform

In 2008, binary options were available to the retail market after approving by the Securities and Exchange Commission (SEC). But many traders who are still new in this field are quite confused about how to choose a broker or which factor do they need to justify.

As we already mentioned, finding an international broker is not wise for the USA traders. As the USA is highly restricted for the regulation purpose, many broker’s platforms are moved their business to other countries.

To choose a platform, you need to consider the below factors. These are:

  • Is the broker properly regulated or not?
  • Trading assets are approved by SEC
  • No free money or bonus offer
  • Available mobile application
  • Check the broker’s overall reputation with customer review.
  • Whether they have a demo account or not.
  • Read the FAQ section with terms and conditions
  • Experienced and quality customer care executive
  • Number of trading instruments
  • Types of trading accounts and payout ratio

Binary Options Trading In The USA

Brokers from the USA does not allow any types of trading bonus. Because the regulatory body are strictly against providing any free money. You can make money based on your investment.

Instead of offering bonuses, they offer various trading promotions, rebates, and other trading programs. On the other hand, a few exchanges offer both fixed and variable payout.

In the USA, binary options trading mainly evaluated by two regulatory and authorized bodies. The fact is that the trading platform must be registered and regulated under Commodities and Futures Trading Commission (CFTC) and the underlying assets must be listed under the securities and Exchange Commission (SEC).

In our next phase, we will give a short introduction to these two regulatory and legal federal government agencies.

What Is The Commodities And Futures Trading Commission (CFTC)

In one sentence, CFTC is a regulatory body in the US for Binary Options contract. To trade binary options , you have to follow strict terms and conditions authorized by CFTC. It was established by the Commodity Futures Trading Commission Act of 1974.

The mission of this agency is to promote the integrity, resilience, and vibrancy of the U.S. derivatives markets through sound regulation.

In recent days, you will find a lot of online trading platforms. These platforms show themselves as a money-making machine with profitable features. On the other hand, CFTC has received numerous complaints through investors on some online binary trading platforms.

The major complaints are:

  • Broker refused to credit customer’s account
  • Refused to refund funds to customers
  • Identity misuse
  • Manipulate software to generate losing trades

This agency closely handles any kind of fraudulent activates obtained by brokers. Traders from the USA can submit a tip if you have been victimized by an unregistered binary options trading platform.

Moreover, you can use CFTC SmartCheck to find out whether the financial broker is properly registered or not

What Is The Securities And Exchange Commission (SEC)

Securities and Exchange Commission (SEC) is an independent federal government agency. The responsibility of SEC is to protect investors, maintain fair, orderly, and facilitate capital formation. It was created by the Congress Government as a result of the Securities Act of 1934.

The primary function of this agency is to inspect different financial organizations. It also ensures either the company is providing truthful information and statements to their trader about their business or they scam people.

Moreover, SEC takes legal steps for those companies who violate the federal securities laws through other illegal conduct.

  • Selling securities that have not been registered with the SEC
  • Unregistered brokers
  • Operating an unregistered exchange
  • Fraud or misrepresentation of information to investors

A binary broker can only be listed as a registered broker in the US market if they put below three matrices together:

  • Offering assets are listed by SEC
  • Platform registered as a trading exchange
  • Broker itself is registered as a designated derivatives contract market

Lastly, brokers can conclude their platform as a registered one, after following the above criteria. Because after fulfilling these conditions, you will able to get a license from CFTC.

A Guide to Trading Binary Options in the U.S.

Binary options are financial options that come with one of two payoff options: a fixed amount or nothing at all. That’s why they’re called binary options—because there is no other settlement possible. The premise behind a binary option is a simple yes or no proposition: Will an underlying asset be above a certain price at a certain time?

Traders place trades based on whether they believe the answer is yes or no, making it one of the simplest financial assets to trade. This simplicity has resulted in broad appeal among traders and newcomers to the financial markets. As simple as it may seem, traders should fully understand how binary options work, what markets and time frames they can trade with binary options, advantages, and disadvantages of these products, and which companies are legally authorized to provide binary options to U.S. residents.

Binary options traded outside the U.S. are typically structured differently than binaries available on U.S. exchanges. When considering speculating or hedging, binary options are an alternative—but only if the trader fully understands the two potential outcomes of these exotic options.

Now that you know some of the basics, read on to find out more about binary options, how they operate, and how you can trade them in the United States.

U.S. Binary Options Explained

Binary options provide a way to trade markets with capped risk and capped profit potential, based on a yes or no proposition.

Let’s take the following question as an example: Will the price of gold be above $1,250 at 1:30 p.m. today?

If you believe it will be, you buy the binary option. If you think gold will be below $1,250 at 1:30 p.m., then you sell this binary option. The price of a binary option is always between $0 and $100, and just like other financial markets, there is a bid and ask price.

The above binary may be trading at $42.50 (bid) and $44.50 (offer) at 1 p.m. If you buy the binary option right then, you will pay $44.50. If you decide to sell right then, you’ll sell at $42.50.

Let’s assume you decide to buy at $44.50. If at 1:30 p.m. the price of gold is above $1,250, your option expires and it becomes worth $100. You make a profit of $100—$44.50 = $55.50 (minus fees). This is called being in the money. But if the price of gold is below $1,250 at 1:30 p.m., the option expires at $0. Therefore you lose the $44.50 invested. This called out of the money.

The bid and offer fluctuate until the option expires. You can close your position at any time before expiry to lock in a profit or a reduce a loss, compared to letting it expire out of the money.

A Zero-Sum Game

Eventually, every option settles at $100 or $0—$100 if the binary option proposition is true and $0 if it turns out to be false. Thus, each binary option has a total value potential of $100, and it is a zero-sum game—what you make, someone else loses, and what you lose, someone else makes.

Each trader must put up the capital for their side of the trade. In the examples above, you purchased an option at $44.50, and someone sold you that option. Your maximum risk is $44.50 if the option settles at $0, and so the trade costs you $44.50. The person who sold to you has a maximum risk of $55.50 if the option settles at $100—$100 – $44.50 = $55.50.

A trader may purchase multiple contracts if desired. Here’s another example:

  • NASDAQ US Tech 100 index > $3,784 (11 a.m.).

The current bid and offer are $74.00 and $80.00, respectively. If you think the index will be above $3,784 at 11 a.m., you buy the binary option at $80, or place a bid at a lower price and hope someone sells to you at that price. If you think the index will be below $3,784 at that time, you sell at $74.00, or place an offer above that price and hope someone buys it from you.

You decide to sell at $74.00, believing the index is going to fall below $3,784 (called the strike price) by 11 a.m. And if you really like the trade, you can sell (or buy) multiple contracts.

Figure 1 shows a trade to sell five contracts (size) at $74.00. The Nadex platform automatically calculates your maximum loss and gain when you create an order, called a ticket.

Nadex Trade Ticket with Max Profit and Max Loss (Figure 1)

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In the EU, financial products are offered by Binary Investments (Europe) Ltd., W Business Centre, Level 3, Triq Dun Karm, Birkirkara, BKR 9033, Malta, regulated as a Category 3 Investment Services provider by the Malta Financial Services Authority (licence no. IS/70156).

Outside the EU, financial products are offered by Binary (SVG) LLC, Hinds Building, Kingstown, St. Vincent and the Grenadines; Binary (V) Ltd, Govant Building, Port Vila, PO Box 1276, Vanuatu, regulated by the Vanuatu Financial Services Commission (view licence); Binary (BVI) Ltd, Kingston Chambers, P.O. Box 173, Road Town, Tortola, British Virgin Islands, regulated by the British Virgin Islands Financial Services Commission (licence no. SIBA/L/18/1114); and Binary (FX) Ltd., Lot No. F16, First Floor, Paragon Labuan, Jalan Tun Mustapha, 87000 Labuan, Malaysia, regulated by the Labuan Financial Services Authority to carry on a money-broking business (licence no. MB/18/0024).

This website’s services are not made available in certain countries such as the USA, Canada, Hong Kong, Japan, or to persons under age 18.

The products offered via this website include binary options, contracts for difference (“CFDs”) and other complex derivatives. Trading binary options may not be suitable for everyone. Trading CFDs carries a high level of risk since leverage can work both to your advantage and disadvantage. As a result, the products offered on this website may not be suitable for all investors because of the risk of losing all of your invested capital. You should never invest money that you cannot afford to lose, and never trade with borrowed money. Before trading in the complex products offered, please be sure to understand the risks involved and learn about Responsible Trading.

In the EU, financial products are offered by Binary Investments (Europe) Ltd., W Business Centre, Level 3, Triq Dun Karm, Birkirkara, BKR 9033, Malta, licensed and regulated as a Category 3 Investment Services provider by the Malta Financial Services Authority (licence no. IS/70156).

In the Isle of Man and the UK, Synthetic Indices are offered by Binary (IOM) Ltd., First Floor, Millennium House, Victoria Road, Douglas, IM2 4RW, Isle of Man, British Isles; licensed and regulated respectively by (1) the Gambling Supervision Commission in the Isle of Man (current licence issued on 31 August 2020) and by (2) the Gambling Commission in the UK (licence reference no: 39172).

In the rest of the EU, Synthetic Indices are offered by Binary (Europe) Ltd., W Business Centre, Level 3, Triq Dun Karm, Birkirkara, BKR 9033, Malta; licensed and regulated by (1) the Malta Gaming Authority in Malta (licence no. MGA/B2C/102/2000 issued on 01 August 2020), for UK clients by (2) the UK Gambling Commission (licence reference no: 39495), and for Irish clients by (3) the Revenue Commissioners in Ireland (Remote Bookmaker’s Licence no. 1010285 issued on 1 July 2020). View complete Regulatory Information.

Binary.com is an award-winning online trading provider that helps its clients to trade on financial markets through binary options and CFDs. Trading binary options and CFDs on Synthetic Indices is classified as a gambling activity. Remember that gambling can be addictive – please play responsibly. Learn more about Responsible Trading. Some products are not available in all countries. This website’s services are not made available in certain countries such as the USA, Canada, Hong Kong, or to persons under age 18.

Trading binary options may not be suitable for everyone, so please ensure that you fully understand the risks involved. Your losses can exceed your initial deposit and you do not own or have any interest in the underlying asset.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 78.6% of retail investor accounts lose money when trading CFDs. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

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