With the potential of earning big money, binary options trading has taken off in a large way all around the globe. From a handful of binary options brokers in 2008, we have about hundreds of them available currently. You will be entrusting your money to a broker to carry on the trade. Hence, it is extremely important that you identify the best binary options brokers from the other small and unreliable ones.
The trading of Binary Options first commenced in 2008 at the Chicago Board of Exchange. Like the name suggests, Binary Options, are derivative contracts with only two possible outcomes at the expiry of the contract i.e. you receive cash/ asset if the contract is ‘in the money’ or nothing otherwise. For example, suppose you buy a call option of ABC Ltd.’s share at a strike price of $30 and a binary payoff of $300. If the stock price is above $30, your contract is ‘in the money’. By ‘in the money’ contract, we mean that you are in a profit situation as you can buy the stock for the strike price of $30 and sell it at a higher price (the current price) and make a profit. In such a scenario, in a binary option contract, you receive a fixed binary payoff of $300. In every other scenario, you receive nothing and lose the purchase price of the contract. The underlying asset can be stocks, indices, commodities and currencies. Making consistent profits out of trading in binary options depends on the accuracy with which you can predict asset movements over the term of the contract.
Following are some important tips for narrowing down your search to the best binary options brokers:
• Choose a regulated broker: A regulated broker is the one which has obtained a license and is governed by the concerned regulatory authority. Choosing a regulated binary options broker will benefit you in many ways such as, payment protection in the event of the broker’s insolvency, proper usage of funds and authenticity of the contracts.
• Access: There are some brokers who prohibit US investors from trading in binary option contracts. If you are a US investor, you will want to check this first before proceeding to evaluate the broker on other parameters.
• Track Record: Choose a broker with at least one year of reputable dealings. Avoid opting for new brokers. The more experienced the broker, the higher will be its credibility as it has been able to survive in this industry.
• Reputation: Before selecting any broker, make sure to check the user reviews/ complaints which will give a fair idea of the reputation of the broker. Pick the broker who has good reviews and fewer complaints.
• User Interface: Since all your transactions will be online, become familiar with the interface of the broker’s website. Easy to use and navigate interface will simplify things and help you take investment decisions easily.
• Number of Options: There are a number of option variants including 60 seconds options in which the option expires after very one minute or One Touch binary option in which you have to predict whether the asset price will at least once cross a pre-determined price during the life of the option. Brokers offering a higher number of option variants are beneficial as it opens up more earning opportunities.
• High Payouts: Higher payout means lower commission to the brokers and obviously higher share of profits to you. Most brokers generally offer 80-85% payout in case the option is ‘in the money’. Some brokers offer 10-15% payout even if the option is out of the money. Choose brokers with favorable payouts.
• Banking options: Since derivative contracts are all about ‘timing’ it is essential that the broker offers you fast and a range of deposit and withdrawal options.
• Customer Service: Fast and prompt customer service is a big advantage for a newbie trader. Test the broker’s customer support with certain pre-account opening queries. Also, a demo account offered by a broker reflects its emphasis on superior customer experience.
• Terms and Conditions: More often than not, unfavorable terms such as higher withdrawal limit are hidden in the fine print of the terms and conditions. Read them in detail before commencing trading with the broker.
It is important that you spend some time in choosing your broker. The above checklist will help you choose among the best binary options brokers in the industry currently.