Is Binary Option Legal?

By Martin Kay
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An Introduction to Binary Options

In the modern age, new businessmen & experienced traders are being appealed by a relatively new trend in online trading; called binary options. Let us first look into some detail about this term. The word binary means ‘of two’, hence as the name suggests, binary options is a trade setting offering only two ways to place a trade deal, followed by two outcomes. The outcome can either be in the money, or out of the money; i.e. you either earn up to 81% profit or lose 85% of your investment. The main factor of binary options that appeals new investors is that it allows them to start trading from as low as 100 US$. No matter how small or big the investments, the trader still has fifty percent probability to earn a profit that would give him up to 81% of the original invested amount. Traders do not have to wait long to know their fate after they have invested; they can earn or lose in just less than an hour’s time. This time is termed as the expiration time which implies that the trader has the power to decide when he would want to end a particular trade. The expiration time can be an hour, a day, a week, or even months. Then the trader has to make a decision that whether he would want to buy or sell the trade. Once the trade has been placed, the trader waits for the expiration time to end and discover the result which can be in the money or out of the money.  Even if the trader has to suffer a loss of 85% of his investments, 15% will be deposited back into his account.

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Using binary options is indeed very risky and most people avoid it, particularly inexperienced businessmen who are not confident about their expert knowledge about international trade prices and rates. This knowledge is a pre requisite In order to profit from binary options. However, on the other hand, binary options are much easier to understand and offer low levels of uncertainty; and hence it is gaining more popularity. Common people who merely dreamed of entering the world of trade can now fulfill their dream through this straight forward and easily accessible trading style. To start a business, it is required that purchasing of stocks or foreign currencies shall be made in order to make an investment. In the case of binary options, rather than actually stepping out of your home to purchase assets, stocks, currency, or other precious commodities for trade, one just have to use their forecasting intellect and predict that whether the price of a certain commodity or stock is going to rise or fall before the expiration period ends. Though, making predictions is not an easy task. It takes a far-fetched business insight to make the right prediction at the right time. Due to this reason, many inexperienced traders seek expert advice before they make their call. Many people view binary options trading as gambling.

Are Binary Options Legal in the US?

The question that arises in the minds of many people is that whether using binary options or digital options trading style is legal or not. Yes, it is legal and has been around for many years now. In past, there were no regulations controlling the flow of this trading style; it used to be done as an over the counter transaction. Over many years, special bodies have been founded which are regulating binary option trade. The Chicago Board Options Exchange or CBOE was created in 1973. This was the first environment that provided a proper platform for all trading options. The CBOE also holds the position of the largest trading options platform as yet. With the creation of the Options Clearing Corporation, there have been increased rules & regulations over the transactions and dealing concerning binary options. The OCC ensures that every buyer and seller in this arena must be supervised and checked in regard to what they are buying or selling. These rules have to abide by all traders or they may be banned from trading in case of any violation. Depending upon the violated rule, the trader might be banned for a certain period or even for a life time. In the year 2007, the Options Clearing Corporation initiated the proposition to amend the rule for binary options trading that allowed only smaller areas of trade. The proposition was to allow binary options on major markets as well. A year passed in negotiations and finally in 2008, major markets were allowed to list trading of binary options as a tradable contract. After this regulation had been passed, the American Stock Exchange was the first stock exchange to initiate the listing of binary options trading. The CBOE followed the pursuit of American Stock Exchange by listing binary options trading in June, 2008. In market trade, however, there is a limit to binary option listing. This is due to the reason that often there a large number of binary options listings for online traders. So, the CBOE currently lists only two indices where traders are welcome to buy options. Extreme limitations and restrictions on major markets when they list binary options; but small online binary options trading is not very restricted. It is indeed legal in all countries including the United States; there are some restrictions as to what the traders are allowed to buy and sell through it. in the US, it is legal to trade through binary options only if the broker is legitimate. Whether the broker is online or you find him personally, there is no issue of legality if he is legitimate. Anyone interested in binary options trading can determine the legality of any broker through several ways like consulting reviews from other traders who have approached the same broker. There are many websites options for everyday trading for the citizens of United States; Forex and currency binary options have been restricted for them.   

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