The history of binary options

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History of Binary Options

The history of binary options can be traced to 2008 when it was first introduced publicly as a tradable asset on the Chicago Board of Exchange (CBOE). 2008 was a year that will not be forgotten in human history. That was the year that the cards came crashing in the financial markets, as the subprime mortgage crisis in the US triggered the collapse of Bear Stearns and Lehman Brothers, and subsequently the global financial system. With such a situation that cost many everyday investors all over the world a lot of money, there was a lot of pressure for investments with a lower risk profile to be made available to traders. This was what led to the entrance of binary options trading as a new form of investment for the average trader.

Even though binary options gained mainstream popularity in 2008, it has actually been around for quite some time. In years gone by, binary options were a semi-official investment product, open only to banks, other institutional and high net-worth investors in the Over-the-Counter (OTC) markets. In essence, the situation with binary options was not much different from what obtained with forex trading prior to 1997 when that market was deregulated.

In order to understand when the practice of trading binary options actually started, we would have to go back almost 40 years, to 1973 when options trading on financial instruments commenced on the newly created CBOE. These early days were difficult as the regulatory framework for trading options were not yet developed. Over the years, binary options trading evolved as a less complicated way of trading options. They were still offered as part of larger and more complex contracts, and as mentioned earlier, there was no regulation whatsoever for binary options. There was still no separate liquid market for trading binary options.

These conditions existed until 2007. By this time, the subprime mortgage crisis had begun to play out with the collapse of real estate prices. The Options Clearing Committee (OCC), which had been created in the early 70s to develop the regulatory framework for the options markets, proposed changes that would see binary options elevated to the status of a financial asset that could be traded on its own in the major exchanges. By early 2008, the US Securities and Exchange Commission (SEC) accepted the recommendations of the OCC and made it legal for binary options to be offered on major exchanges as a stand-alone, tradable financial instrument. By May of the same year, the American Stock Exchange (AMEX) started offering binary options to the public for the first time, and the CBOE followed suit the following month.

Even as at 2008, the process by which binary options were traded on the CBOE and AMEX were cumbersome and restrictive. Traders who wanted to buy binary options on CBOE had to purchase the contracts on the S&P 500 index, and only one type of options (call options) could be purchased.

The advances in information technology which has seen the advent of trading software that have been deployed for online use as well as mobile versions of the trading platforms, have seen an explosion of binary options trading. There is a lot more flexibility now. No longer are traders restricted in terms of where to trade or the type of options to trade. Traders can now trade both call and put binary option types, trade a plethora of financial assets across several markets, and can now trade binary options on the go with their smartphones.

In addition, many more trade varieties have evolved, with traders now being able to trade binary options in three different ways. Recently, a few brokers such as Optionfair.com have upped the ante by being pioneers in providing simulated trading and charting tools for traders to conduct technical analysis prior to trades. This is something that had been traditionally absent with binary options trading.

With more brokers and vendors coming up with products for the binary options markets, the true beneficiaries are none other than the traders, who now have better options when it comes to binary options trading. With the blazing speed at which technological innovations have come on stream in the last 5 years beginning with the iPhone, one can only imagine what the future would hold. One thing is sure; if this blog were to rewrite this article in the next 5 years, there would be a lot more to say about the history of binary options trading.

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What is the history of binary options?

Binary options trading is option trading for which there are two possible results. A trader purchases an option and at the expiration of the option period.

If the option is profitable, it generates approximately an 80% return on the trader’s investment. If the option is not profitable, the trader loses whatever amount of money he had paid for the option. Binary options are very simple to trade, even for inexperienced investors, and binary options trading requires very little starting capital – usually no more than a few hundred dollars.

Binary options trading for the average retail trader essentially began with the U.S. Securities and Exchange Commission’s approval for exchange trading of these options in 2008. Since then, it has expanded and spread very rapidly.

Binary options had, in fact, existed for many years before 2008, but they were previously available only to large, institutional traders or high net worth individuals through the over-the-counter market.

In 2007, the Options Clearing Commission recommended changes in binary options trading that would make them freely available for retail traders, and in 2008, the SEC approved the offering of binary options as a tradeable investment instrument. Shortly thereafter, the Chicago Board Options Exchange (CBOE) and the American Stock Exchange began offering binary options for public trading.

Early on, binary options trading was still complex and challenging for retail traders. Initially, only call options were available on the CBOE. Two factors led to the explosion of binary options trading: first, the broadening of the types of options available, accompanied by significant improvements in trading platform software that greatly simplified the trading of binary options. Another factor was the introduction of binary options in forex trading, where they gained popularity much more quickly than they had in stock and futures trading.

Today, there is growing flexibility in binary options trading. Traders can specify not only the amount of money they wish to risk on an option, but its strike price and expiration period. It is possible to purchase insurance on a binary options trade by opting for a lower payout percentage, in exchange for which the trader will only lose part – rather than all of his option investment – if the option is not profitable at expiration.

Binary options are available across virtually all tradeable financial assets, with a variety of contract types and expiration periods ranging from one minute to one year. There are hedge funds that primarily focus on binary options trading. In the forex markets, binary options trading was initially only available through specialized brokers. Recently, regular forex brokers have added binary options trading platforms for their clients. Binary options trading will likely continue to increase in popularity in the foreseeable future.

The History of Binary Options

Binary Options first went main stream in 2008, but it has actually been around since 1997. At the time it was only available to banks, institutional companies and High Net Worth investors. Trading Binary was a lot more difficult than it is today, mainly because only Call options were available and trading could only be done through the Chicago Board of Exchange (CBOE). Complex contacts in a market with no liquidity required a lot of expertise to understand to be successful. Also, as it was at that time unregulated, it made over the counter markets very challenging.

2008 saw the greatest financial crash in history, and saw a rise in popularity of Binary as investors and traders were ‘stung’ by many of the large ‘Hedge Funds’ losing substantial amounts of money and closing their doors. The need for a low risk investment was needed and this is where Binary Options stepped in to fill the gap.

Wind the clocks forward to 2008 and Binary Options is probably the most recognised and favoured forms of trading for Home traders and retail traders. Trading Binary is so easy now it can be done all from a laptop at home and you can be setup with minutes. Because of how easy it can be understood and traded from home, it has been a target for scammers across the globe. Infact in 2020 it was reported that £87,410 was being scammed from traders every single day from Binary scams and it became the largest online scam in history.

Now Binary itself is not a scam if you seek professional advice and trade with a regulated broker but its the scammers that give it a bad name. Trading with an unregulated broker is the biggest part of this. You see in 2020/2020 you could set a white label Binary broker up for as little as £10’000 and this is where you play the middle man between the liquidity broker and the trader. The liquidity would provide the data feed to your platform for a monthly fee and then you, as the broker would offer Binary Options to your users. The broker would earn their money every time you lose so it was in their best interest for you to invest everything you have and convince you to trade more than you are comfortable doing so. Crazy offers like invest £1000 and we will match the investment was used and trade big and win big was all used to lure traders in. There was even cases of the brokers calling the traders and offering to trade their money for them to only discover they had lost everything. These types of brokers were unregulated and actually had no fixed address. Most of the time they were started in Cyprus but would purchase London Postcodes and phone numbers to look more professional and this made it very hard to trace where the money was going.

Thankfully with the ban of all European brokers offering Binary options to retail traders, the number of cases are slowly decreasing and the new scam has turned onto Crypto Currency.

Retail Trader = Normally an individual trader trading their personal account from home.

Institutional Trader = A trader who trades for a managed account, hedge fund or bank. Their account sizes and trade sizes are considerable larger than a retail traders.

Now with all that said is Binary Options still tradable and is it safe?

The simple answer is yes. For most retail traders now, there are a select few Brokers who are regulated and safe to trade Binary with and you can find them on our partnership page of the website. Binary itself is not a scam and with the right guidance and help you can profit from it. Taking advice from so called Account Managers and Signal providers offering 100% winning signals is a sure way for you to lose your money.

I have personally been a victim of this. In my early days of trading, I would get lured into joining unregulated brokers just so I could receive some apparently 100% winning signals. Now as a beginner you can accept its an easy thing to believe because we don’t know anything else. We see the expensive watches and flashy cars and we think we can profit from doing very little work but receiving signals. To cut the story short, I lost around £2000 in the first 6 months of my trading career and had never even looked at any charts. I was simply placing trades off my mobile every time I received a signal. It took nearly a year of doing this to realise the only way you will make real money is by taking the time to learn yourself.

Forget the easy get rich quick schemes and focus on the long term goals.

What do you want from trading? A quick buck or a successful career from it?

I know which one I want!

Now out of all the different forms of trading, Binary is by far the easiest to learn and trade but is it the easiest to make profit with??

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    Binarium

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  • Binomo
    Binomo

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