Tag Archives: Binary Options Brokers

Nadex is CFTC regulated

How Is NADEX Different From Other Binary Options

The North American Derivatives Exchange

nadex logoNADEX is the North American Derivatives Exchange. It is an offshoot of IG Markets, an international provider of CFD and other derivative instruments. Currently IG Markets operates in England, Europe and Australia providing traders a platform for trading. NADEX is the North American branch of this network and currently the only CFTC, SEC and OCC registered, licensed and regulated broker or exchange operating in the U.S. and North America. Regulation is important for binary options because it provides a base from which the industry can grow while building trust among traders and service providers. CFTC and SEC regulation is not the only kind of binary option regulation, just the only kind recognized acceptable in the U.S. at this time.

Binary Options Regulation

Several different countries regulate binary options

Several different countries regulate binary options

Other forms of binary options regulation include  CySEC, FSA, FSC, BaFIN and Isle of Man GSC among other local jurisdictions. CySEC has been leading the way in this regard. It is the Cyprus Securities and Exchange Commission and was the first to categorize binary options as a financial instrument. Because of CySEC’s work and member status in the EU CySEC regulated binary options brokers and service providers are able to reach traders throughout the EU and friendly nations through the Economic Passport.

Banc De Binary is one of the leading binary options brokers in this area although they still suck as a broker. BDB was the first to get CySEC regulation and subsequently FSA and BaFIN regulation. The FSA is the Financial Services Authority of England, BaFIN is the financial regulatory body of Germany. Other countries are also getting into the fray of binary options regulation. The FSC of the British Virgin Islands is one. This small island nation is one of the worlds banking/tax havens and a hot spot of the binary options industry. At this time there is no binary options broker, exchange or service legally operating in the U.S. besides NADEX and the limited binary offerings of the CBOE and AMEX.

  • Binary Options Regulation – Futures, options and derivatives trading is governed in the U.S. by the CFTC and the Commodity Exchange Act. Through its mandate to protect U.S. citizens from fraud and unscrupulous trading practices the CFTC has said that no unregulated options or other financial derivatives may be marketed or sold to U.S. citizens. This is why BDB and others have been shutting their doors to the U.S. The SEC’s stance is a little less clear and seems to provide a loophole a few brokers have seized upon.   These loopholes have lead some brokers to offer options on some assets but not on others, usually commodities.

    It seems clear to me that as regulation progresses in other parts of the world it will systematically shut down access to U.S. traders.  Regulation could change at any time and those loopholes could close at any time. CySEC’s recognition of binaries as financial instruments is great for the European and international markets but will eventually keep them out of the U.S. market. There are other sources of “off shore” binary options regulation such as ASIC, FSA and Isle Of Man GSC.

What Can You Trade At NADEX

There are some differences between NADEX and European style options that lie mostly in the types of options traded. With CySEC/European style binary options you can trade high/low, over/under, one touch, 60 second, range and 0-100 style binary options on all the major world indexes, currency pairs and commodities. At NADEX you can still trade all the same underlying assets but they are less types of options to choose from. There are only two kinds of options at NADEX, binary options and bull spreads.

Binary options are a fixed return, all or nothing trading vehicle with only two outcomes. If you win the option is worth $100, if you lose it is worth nothing. The price you pay for each contract will be somewhere between $0 and $100 depending on market conditions. If you pay $45 for an option and it profits you receive $100 for a net gain of $55-fees. Bull spreads trade like a covered call or options spread. They are binary outside the range but pay spot price within the range.

Nadex assets are easy to use and follow

Nadex assets are easy to use and follow

  • NADEX has binary options and bull spreads on all the major stock indexes, 8 major currency pairs, commodities and even some economic events. Each underlying asset is traded through a derivative binary options with an identical value. Some, but not all, have a different name. The S&P 500 is called the U.S. 500 and the EUR/JPY is stilled called the EUR/JPY.
  • Binary Options- NADEX binary options are all or nothing trading vehicles with expirations ranging from this morning to this afternoon, the close of todays session or the close of this weeks session. They are worth $0 or $100 at expiration. You choose from a list of possible strikes and expirations, pay market price and profit the difference. Market price will range between $0 and $100, comes with a bid/ask spread and fluctuates with the movement of the underlying asset.
  • Bull spreads- Bull spreads are similar to binary options but have some distinct differences. In essence bull spreads trade like a future mixed with an option spread. Outside the range of the spread the bull spread is binary, just like an options spread. If it closes higher than the range you get the maximum return, if it closes lower than the range you get the maximum loss. Within the range the bull spread trades like a future and is worth $1 per point. If the bull spread closes within the range but higher than your buy-in point you will receive the difference between your paying price and the spot price at expiration.

Trader Resources At NADEX

nadex webinars mayThere is a complete set of trader tools at NADEX. The set includes the basic information on trading binary options and bull spreads and other more advanced tools. The ongoing education series consists of daily webinars on subjects ranging from strategy to charting and psychology. The platform is easy to use but takes a little getting used to. Once you have taken the tour and gotten familiar with it you will have no problem. There are charts available but I still prefer to use my charts through OptionsXpress.

What Are The Differences Between NADEX and CySEC Binary Options

nadex order ticketLet’s compare NADEX and the general off-shore/European Style/CySEC binary options industry. European style CySEC regulated binary options brokers are not the same as NADEX for a variety of reasons. First, CySEC regulated binary options brokers are more like banks offering high yield investments. NADEX is more like the NYSE or the AMEX. The high yield investments, binary options, are sold directly from the bank(binary options broker) to the client (you). The binary broker makes money by keeping 70-100% of losing trades and a smaller percent of winning trades. Brokers try to keep their books even by matching buyers of puts and calls. When this is not possible they have even resorted to manipulating closing prices in order to keep themselves in the green. These aspects of the binary options industry is one of the reasons it has received so much criticism over the past few years and why there is so much risk of fraud and shady dealings from offshore brokers. This is also why CySEC came into play, to prevent fraud and provide a framework for fair dealing.

Second, NADEX is an options exchange. This means it is a market place, much like your local farmers market.A binary options market place is where binary options traders can come together to buy and sell options. The exchange charges a fee per trade in order to make its money and not a percentage.  The fees are inconsequential when compared to trading CySEC style binary options. NADEX charges $0.90 per contract with a maximum fee of $9 per trade. $100 at NADEX could buy you two contracts with a cost of $1.80. With CySEC if you trade $100 the broker may get $70-$100 of that money if you lose, depending on rebate structure. They may get as much as $20-$30 from the opposite side of the trade if you win.

This difference is one reason why CySEC style binary options are not allowed in the U.S. I know you are thinking to yourself right now if that is the case why are so many brokers still operating with U.S. clients. The answer to this is they are doing so at the risk of themselves and their clients. The CFTC has already shut down several brokers. The leading CySEC style binary options brokers are now shutting their doors to U.S. traders one-by-one as they receive regulation to protect themselves so be careful if you (American Trader) choose to use one.

nadex sell ticketThe third major difference between NADEX and CySEC/European binary options is tradability. CySEC binary options can not be sold (usually) before expiration and are only worth $0 or your predetermined return. NADEX binary options are highly tradable and can be bought and sold at any time prior to expiration. Since the price of NADEX options changes over time your profit or loss will be determined by the difference in opening price and closing price. Another great thing about NADEX binary options is that they can be sold short. That’s right, sold short. Unlike CySEC options which are only debit positions (buy a call if bullish, buy a put if bearish) NADEX options are either debit or credit. You buy the position if you think the market is moving up and will close above, you sell the position if you think the market is not moving up and will not close above. This reason alone makes NADEX more attractive to me simply because it opens up so many different types of strategies that can not be used with CySEC options.

  • The Greeks And Binary Options- The options Greeks Delta, Theta, Vega and Gamma have no bearing on binary options. They do play an underlying role on market value but are not present during trading. You do not have to worry about how far, how fast an asset moves while keeping one eye on volatility and another on interest rates. Binary options close in the money if they are above the strike price and out of the money if they are below it. They only have two values and you receive all or nothing at expiration.

Click Here For More Information On NADEX Binary Options Strategies

Are CySEC Binary Options Brokers Safe

CySEC style binary options and brokers are safe. Trading binary options is a viable method of speculating world markets and it can be done profitably. However, like all financial vehicles, especially highly speculative ones like binary options, they come with risk and should be approached with caution. Be sure to check into any broker before depositing money and make double sure of their withdrawal methods and requirements. I have three CySEC/European style binary options brokers on my short list of approved brokers. These are:

Binary Options Are Risky 

Trading of any kind is risky. I highly recommend that you spend as much time as possible learning about the financial markets, fundamental and technical analysis before you begin any trading. You should also consult a professional and make sure you have the resources to risk money on trading binary options. Binary options are not a get rich quick scheme, it is possible to lose your entire investment or account in one trade.

big 24option logo

24Option Could Be The Best Binary Options Broker

24Option’s Is My New Favorite Binary Options Platform

I have been using 24Option off and on for a while now but hadn’t really gotten into their platform until recently. The reason it hadn’t been my favorite is the expiries. For some reason 24Option only had really short term expiries, usually intraday. That is until now.  Binary options are now offered with end of the week or end of the week month expiration and the list is growing. Other than that I liked what I saw there but just didn’t take the time to dig deeper. Once they began offering the longer term expiries it seemed prudent to see just what they were all about.

Some available forex pairs at 24Option

Some available forex pairs at 24Option

Once I began to dig into 24Options website and trading platform I was thoroughly surprised. The more I looked the more I found and I even learned some new things along the way. The website is top notch and offers all the tools and assistance required to get any reasonably intelligent person trading binary options successfully. And I do mean successfully.  Of course there is a catch. Trading any financial instrument successfully requires a certain amount of interest, dedication and commitment on the part of said person, it is not easy. In fact, 24Option says things to that effect along the way. I even found one place where they recommend small, low risk trades as a way of utilizing risk management. If you have that kind of interest then you will find what you need to get started at 24Option.

24Option Is Different From The Rest

Trader education is top notch at 24Option

Trader education is top notch at 24Option

One of the first things you will notice about 24Option is that it does not look like the rest. 24Option is a proprietary binary options trading platform from Tech Financials, not just another SpotOption spin-off. For that reason everything located on the site is unique to 24Option and not found anywhere else. Tabs on the home page are easy to navigate and take right where you need to be. Several tabs and links on the home page take you to different parts of their educational section but all lead to the same place; the Binary Options Guide.  You will also find a link to this on the top of the page. This link takes you to a menu with the holy grail of binary options information. What other broker websites have hinted at I have found here at 24Option, no joke, they didn’t pay me to say that.

24Option Is Serious About Trader Education

I found the guide to be very thorough. They covered topics from a different perspective than what I have found elsewhere and presented them in a more useful manner. Pictures, tables and charts are included in the basic how-to parts of the guide and include pertinent vocabulary along the way. I thought this was a nice touch and made accessing the information much easier to assimilate. After moving on from the basic information I found several other things to take note of. The e-book, Binary Options Daily, Binary Options Strategy, webinars and videos.

Binary Options Strategy- This is one section that no other broker I have reviewed has. It is an introduction to the rules of market speculation and risk management. This section won’t make you an expert but is a good start into understanding the nature of position sizing and risk management. For more information on that check out this article on How To Make A Binary Options Trading Strategy.

  • The e-book was as expected, a compilation of all the information contained on the website. The quality of what I found on the web site did show through in the e-book. It was also top notch. If nothing else 24Option has put a lot of effort into web design.
  • Another link will take you to the video library. There are five videos, each about 10-15 minutes long, covering topics like trader psychology, financial management and market analysis. I have found videos other places but these are better, and come with the rest of the site.
  • The real treat was the webinars. 24Option has live webinars scheduled nearly every day. Traders can log on, watch the lesson and then participate in a Q&A session.
  • As an added bonus there is also a daily market commentary called Binary Options Daily that covers the global indexes and all the major currency pairs. Some other brokers have similar updates but none cover as many markets. Some require an account and others only come out once a week.

24Option Is A Regulated Binary Options Broker

24Option is a regulated binary options broker. It is located in Cyprus like many other reputable brokers and is subject to CySEC regulation. This means that 24Option is compliant with all laws and regulations, has been approved by CySEC, is subject to third party auditing and sanctions, holds all deposits in separate trust accounts to ensure safety and also qualifies for the European Economic Arena Passport. Look for this broker to seek certification and regulation in other countries as well. The bad news for U.S. traders is that because of CySEC recognition and regulation 24Option must shut its doors to us. Not to worry though, I have been told that we should expect a spin off brand soon that will accept U.S. deposits and trading.

24Option Asset Expiry And Available Options

Unlike some brokers there are no spreads with 24Option. Some brokers sell you an option that is at their determined level, or the level they feel comfortable selling it you. They may even apply some buffer to the closing price. This is not ideal. 24Option has a very simple and transparent method for determining strike and expiry level. In the case of an index it is the last quoted price on the ticker before expiration time. In the case of an asset with a bid and ask it is the average of the last quote for those two prices before expiration.

Available Options-  include high/low, one touch, range and short term options and new expiries. The high/low option is the standard binary options where you buy a call if you think the asset is moving up and a put if you think down. One touch options are betting on an asset reaching a target price once during a specified time, usually daily or weekly. The range option is a choice that I don’t see everywhere. This is a good tool for range bound stocks or days you think the market is going to be quiet. 24Option even has early out options for many, if not most of their options. Availability is listed along with your open positions at the top right of the trading screen. All available assets for each type of option are listed on one page.

Short Term Options-  24Option has also added short term options and once again set the bar for other platforms. 24Option offers the popular 60 second options and also has 2 and 5 minutes options. In my opinion 60 second options are pure gambling and good luck to you if you choose to try them. The new short term 2 and 5 minute options are questionable in my opinion. They may have some use with scalping strategies, in strongly trending markets or trying to catch the knee-jerk reaction to news events.

New Expiries- 24Option added new expiries to suit the needs of traders like myself. Not everyone wants to take the risk of ultra short term intraday trading. The new end of day, end of week and end of month expiries are perfect. This feature is what would draw me away from my previous favorite.

Withdrawals-  Withdrawals can be made at any time and are delivered within 7 business days.  Once ID requirements are met and a withdrawal request is received withdrawals will arrive in your account in about 2 standard weeks. Withdrawals can be made to credit card or wire transfer and do not have any fees.

Should You Use 24Option

Using 24Option as a binary options broker can only be your decision. Investing and trading are risky and require a disciplined approach. You should only choose this broker after performing your own research and checking sources other than myself. If you think it is a quality broker and choose to trade binary options I think this is the best platform you could use. Based on what I know of binary options and what I have learned about 24Option I would use them.