option trading usa: 2017

Selasa, 12 Desember 2017

option trading us

A binary option is a financial option in which the payoff is either some fixed monetary amount or nothing at all.^[1]^[2] The two main types of binary options are the cash-or-nothing binary option and the asset-or-nothing binary option. The cash-or-nothing binary option pays some fixed amount of cash if the option expires in-the-money while the asset-or-nothing pays the value of the underlying security. They are also called all-or-nothing options, digital options (more common in forex/interest rate markets), and fixed return options(FROs) (on the American Stock Exchange).^[3]

While binary options theoretically play a role in asset pricing, they are prone to fraud and banned by regulators in many jurisdictions as a form of gambling.^[4] Many binary option outlets have been exposed as fraudulent.^[5] The U.S. FBI is investigating binary option scams throughout the world, and the Israeli police has tied the industry to criminal syndicates.^[6]^[7]^[8] The FBI estimates that the scammers steal US$10 billion annually worldwide.^[9] The use of the names of famous and respectable people such as Richard Bransonto encourage people to buy fake "investments" is frequent and increasing.^[10] Articles published in the Times of Israel newspaper explain the fraud in detail, using the experience of former insiders such as a job-seeker recruited by a fake binary options broker, who was told to "leave [his] conscience at the door".^[11]^[12] Following the articles published by the Times of Israel, Israel's cabinet approved a ban on sale of binary options in June 2017,^[13] and a law banning the products was approved by the Knesset in October 2017.^[14]^[15]

Function[edit]

Binary options "are based on a simple 'yes' or 'no' proposition: Will an underlying asset be above a certain price at a certain time?"^[17] Trades place wagers as to whether that will or will not happen. If a customer believes the price of a commodity or currency will be above a certain price at a set time, he buys the binary option. If he believes it will be below that price, he sells the option. The price of a binary is always under $100.^[17]

Investopedia described the binary options trading process in the U.S. thusly:

[A] 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 (less 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 is called being "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).^[17]

Every option settles at $100 or $0, $100 if the bet is correct, 0 if it is not.^[17]

option trading usa

Getting started in options trading in the United States requires depositing significant upfront capital into an option broker’s account. Before entrusting your money to a brokerage, protect yourself by making sure the broker is fully regulated under U.S. law.

In the United States, the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA) under it regulate the market of all option contracts which have a stock or index as an underlying security. The Commodity Futures Trading Commission (CFTC) and the National Futures Association (NFA) under it regulate the market of all options contracts which have forex, commodities, or futures as the underlying security. (See related How does FINRA differ from the SEC?)

All option traders operating in the United States should be registered and regulated by at least one of the above authorities, depending upon the type of option products they offer. These organizations protect customers and their rights and and insure customer assets should the broker go bankrupt. Below is a list of top U.S.-regulated options brokers. Please note that this list is not presented in any particular order and is not exhaustive. There are many more regulated options brokers.

Binary options are based on 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 amongst 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. (For related reading, see What You Need To Know About Binary Options Outside The U.S.)

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.

For 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 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 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 (less fees). This is called being in the money.