Binary Option Insights – Your Guide to Binary Options Trading, Brokers and Forex Trading

Best Binary Options Brokers 2020:
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Trading Forex with Binary Options

Binary options are an alternative way to play the foreign currency (forex) market for traders. Although they are a relatively expensive way to trade forex compared with the leveraged spot forex trading offered by a growing number of brokers, the fact that the maximum potential loss is capped and known in advance is a major advantage of binary options.

Defining Binary Options

Binary options have two outcomes: They settle either at a pre-determined value (generally $100) or at $0. This settlement value depends on whether the price of the asset underlying the binary option is trading above or below the strike price by expiration.

Binary options can be used to speculate on the outcomes of various situations: Will the S&P 500 rise above a certain level by tomorrow or next week? Will this week’s jobless claims be higher than the market expects? Or will the euro or yen decline against the U.S. dollar today?

For example, say gold is trading at $1,195 per troy ounce currently and you are confident that it will be trading above $1,200 later that day. Assume you can buy a binary option on gold trading at or above $1,200 by that day’s close, and this option is trading at $57 (bid)/$60 (offer). You buy the option at $60. If gold closes at or above $1,200, as you had expected, your payout will be $100, which means that your gross gain (before commissions) is $40 or 66.7%. On the other hand, if gold closes below $1,200, you would lose your $60 investment, for a 100% loss.

Binary Option Buyers and Sellers

For the buyer of a binary option, the cost is the price at which the option is trading. For the seller of a binary option, the cost is the difference between 100 and the option price and 100.

From the buyer’s perspective, the price of a binary option can be regarded as the probability that the trade will be successful. Therefore, the higher the binary option price, the greater the perceived probability of the asset price rising above the strike. From the seller’s perspective, the probability is 100 minus the option price.

All binary option contracts are fully collateralized, which means that both sides of a specific contract – the buyer and seller – have to put up capital for their side of the trade. So if a contract is trading at 35, the buyer pays $35, and the seller pays $65 ($100 – $35). This is the maximum risk of the buyer and seller and equals $100 in all cases.

Thus the risk-reward profile for the buyer and seller in this instance can be stated as follows:

Buyer

  • Maximum risk = $35
  • Maximum reward = $65 ($100 – $35)

Seller

  • Maximum risk = $65
  • Maximum reward = $35 ($100 – $65)

Forex Markets

Binary options in forex are available from exchanges such as Nadex, which offers them on the most popular pairs such as USD-CAD, EUR-USD, and USD-JPY, as well as on a number of other widely-traded currency pairs. These options are offered with expirations ranging from intraday to daily and weekly. The tick size on spot forex binaries from Nadex is 1, and the tick value is $1.

The intraday forex binary options offered by Nadex expire hourly, while the daily ones expire at certain set times throughout the day. The weekly binary options expire at 3 P.M. on Friday.

Best Binary Options Brokers 2020:
  • Binarium
    Binarium

    Best Binary Options Broker 2020!
    Free Trading Education!
    Free Demo Account!
    Perfect for Beginners!

  • Binomo
    Binomo

    2 place in the ranking!

For forex contracts, Nadex calculates the expiration value by taking the midpoint prices of the last 25 trades in the forex market, eliminates the highest five and lowest five prices, and then takes the arithmetic average of the remaining 15 prices.

Examples of Binary Options in Forex

Let’s use the EUR-USD currency pair to demonstrate how binary options can be used to trade forex. We use a weekly option that will expire at 3 P.M. on Friday, or four days from now (or Monday). Assume the current exchange rate is EUR 1 = USD 1.2440.

Consider the following scenarios:

1. You believe the euro is unlikely to weaken by Friday and should stay above 1.2425. The binary option EUR/USD>1.2425 is quoted at 49.00/55.00. You buy 10 contracts for a total of $550 (excluding commissions). At 3 P.M. on Friday, the euro is trading at USD 1.2450. Your binary option settles at 100, giving you a payout of $1,000. Your gross gain (before taking commissions into account) is $450, or approximately 82%. However, if the euro had closed below 1.2425, you would lose your entire $550 investment, for a 100% loss.

2. You are bearish on the euro and believe it could decline by Friday, say to USD 1.2375. The binary option EUR/USD>1.2375 is quoted at 60.00/66.00. Since you are bearish on the euro, you would sell this option. Your initial cost to sell each binary option contract is, therefore, $40 ($100 – $60). Assume you sell 10 contracts, and receive a total of $400. At 3 P.M. on Friday, let’s say the euro is trading at 1.2400.

Since the euro closed above the strike price of $1.2375 by expiration, you would lose the full $400 or 100% of your investment. What if the euro had closed below 1.2375, as you had expected? In that case, the contract would settle at $100, and you would receive a total of $1,000 for your 10 contracts, for a gain of $600 or 150%.

Additional Basic Strategies

You do not have to wait until contract expiration to realize a gain on your binary option contract. For instance, let’s say by Thursday the euro is trading in the spot market at 1.2455, but you are concerned about the possibility of a decline in the currency if U.S. economic data to be released on Friday are very positive. In this case, your binary option contract (EUR/USD>1.2425), which was quoted at 49.00/55.00 at the time of your purchase, is now at 75/80. Therefore, you could sell the 10 option contracts you had purchased at $55 each, for $75, and book a total profit of $200 (or 36%).

You can also put on a combination trade for lower risk/lower reward. Let’s consider the USD/JPY binary option to illustrate. Assume your view is that volatility in the yen – trading at 118.50 to the dollar – could increase significantly, and it could trade above 119.75 or decline below 117.25 by Friday. You, therefore, buy 10 binary option contracts (USD/JPY>119.75, trading at 29.50/35.50) and also sell 10 binary option contracts (USD/JPY>117.25, trading at 66.50/72.00). Therefore, you pay $35.50 to buy the USD/JPY>119.75 contracts, and $33.50 (i.e., $100 – $66.50) to sell the USD/JPY>117.25 contracts. Your total cost would be $690 ($355 + $335).

Three possible scenarios arise by option expiration at 3 P.M. on Friday:

  1. The yen is trading above 119.75. In this case, the USD/JPY>119.75 contract has a payout of $100, while the USD/JPY>117.25 contract expires worthless. Your total payout is $1,000, for a gain of $310 (or about 45%).
  2. The yen is trading below 117.25.In this case, the USD/JPY>117.25 contract has a payout of $100, while the USD/JPY>119.75 contract expires worthless. Your total payout is $1,000, for a gain of $310 (or about 45%).
  3. The yen is trading between 117.25 and 119.75: In this case, both contracts expire worthlessly and you lose the full $690 investment.

The Bottom Line

Binary options are a useful tool as part of a comprehensive forex trading strategy but have a couple of drawbacks in that the upside is limited even if the asset price spikes up, and a binary option is a derivative product with a finite lifespan (time to expiration).

However, binary options have a number of advantages that make them especially useful in the volatile world of forex. For starters, the risk is limited (even if the asset prices spikes up), the collateral required is quite low, and they can be used even in flat markets that are not volatile. These advantages make forex binary options worthy of consideration for the experienced currency trader.

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In the EU, financial products are offered by Binary Investments (Europe) Ltd., W Business Centre, Level 3, Triq Dun Karm, Birkirkara, BKR 9033, Malta, regulated as a Category 3 Investment Services provider by the Malta Financial Services Authority (licence no. IS/70156).

Outside the EU, financial products are offered by Binary (SVG) LLC, Hinds Building, Kingstown, St. Vincent and the Grenadines; Binary (V) Ltd, Govant Building, Port Vila, PO Box 1276, Vanuatu, regulated by the Vanuatu Financial Services Commission (view licence); Binary (BVI) Ltd, Kingston Chambers, P.O. Box 173, Road Town, Tortola, British Virgin Islands, regulated by the British Virgin Islands Financial Services Commission (licence no. SIBA/L/18/1114); and Binary (FX) Ltd., Lot No. F16, First Floor, Paragon Labuan, Jalan Tun Mustapha, 87000 Labuan, Malaysia, regulated by the Labuan Financial Services Authority to carry on a money-broking business (licence no. MB/18/0024).

This website’s services are not made available in certain countries such as the USA, Canada, Hong Kong, Japan, or to persons under age 18.

The products offered via this website include binary options, contracts for difference (“CFDs”) and other complex derivatives. Trading binary options may not be suitable for everyone. Trading CFDs carries a high level of risk since leverage can work both to your advantage and disadvantage. As a result, the products offered on this website may not be suitable for all investors because of the risk of losing all of your invested capital. You should never invest money that you cannot afford to lose, and never trade with borrowed money. Before trading in the complex products offered, please be sure to understand the risks involved and learn about Responsible Trading.

In the EU, financial products are offered by Binary Investments (Europe) Ltd., W Business Centre, Level 3, Triq Dun Karm, Birkirkara, BKR 9033, Malta, licensed and regulated as a Category 3 Investment Services provider by the Malta Financial Services Authority (licence no. IS/70156).

In the Isle of Man and the UK, Synthetic Indices are offered by Binary (IOM) Ltd., First Floor, Millennium House, Victoria Road, Douglas, IM2 4RW, Isle of Man, British Isles; licensed and regulated respectively by (1) the Gambling Supervision Commission in the Isle of Man (current licence issued on 31 August 2020) and by (2) the Gambling Commission in the UK (licence reference no: 39172).

In the rest of the EU, Synthetic Indices are offered by Binary (Europe) Ltd., W Business Centre, Level 3, Triq Dun Karm, Birkirkara, BKR 9033, Malta; licensed and regulated by (1) the Malta Gaming Authority in Malta (licence no. MGA/B2C/102/2000 issued on 01 August 2020), for UK clients by (2) the UK Gambling Commission (licence reference no: 39495), and for Irish clients by (3) the Revenue Commissioners in Ireland (Remote Bookmaker’s Licence no. 1010285 issued on 1 July 2020). View complete Regulatory Information.

Binary.com is an award-winning online trading provider that helps its clients to trade on financial markets through binary options and CFDs. Trading binary options and CFDs on Synthetic Indices is classified as a gambling activity. Remember that gambling can be addictive – please play responsibly. Learn more about Responsible Trading. Some products are not available in all countries. This website’s services are not made available in certain countries such as the USA, Canada, Hong Kong, or to persons under age 18.

Trading binary options may not be suitable for everyone, so please ensure that you fully understand the risks involved. Your losses can exceed your initial deposit and you do not own or have any interest in the underlying asset.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 78.6% of retail investor accounts lose money when trading CFDs. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

7 Binary Options

Marcio

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OANDA is a US-based FX broker established in the 1990s by Dr Richard Olsen and Dr Micheal Stumm. Over the years, it has built a reputation as one of the oldest and best online forex brokers for both new and experienced traders. In 2001, OANDA became the first online broker to launch a fully automated platform known as FXTrade. The broker channels more than 20% of the spot forex around the globe, and it handles over one million trades every day. Oanda is the proud winners of the 2020 Best Online Brokers Awards.

Regulation is one of the key factors you need to consider when choosing a Forex Broker. Oanda is licensed and monitored by some of the toughest financial authorities, including ASIC and UK FCA. Experienced traders enjoy using OANDA because it gives them access to various opportunities in the financial markets, including CFD trading.

The brand operates in 8 different markets across the globe, including Canada, Australia, Singapore, Japan, US and the UK.

Oanda Proprietary fx Trade platform is fully compatible with PCs and mobile screens of all sorts. Also, it provides its traders with the famous MetaTrader4 (MT4) software. Oanda app marketplace supports integration with numerous 3rd party platforms and apps.

Oanda offers attractive trading costs that are below the industry average, but it focusses more on delivering superior execution quality and transparency. The brokers allow a lot of flexibility when it comes to lot sizes, but it lacks several important products such a single-stock CFDs and cryptocurrencies.

In this Oanda review, we will give a balanced analysis of the platforms commission and costs, pricing transparency, technology, regulation, and product offering analysis. Buckle up.

Trust, Security, and Safety

OANDA has built trust in the industry over the years. It won the Investment Trends Magazine’s award for a forex broker with the highest customer satisfaction in 2020. As aforementioned, the brand also scooped the 2020 Best Online Brokers Awards. So, you would be right to say that the platform oozes trust and reliability in every way.

Oanda is licensed and regulated by six-tier one (most trustworthy) regulators. These include:

  • Japanese Financial Services Authority (JFSA).
  • Monetary Authority of Singapore (MAS)
  • Australian Securities & Investment Commission (ASIC)
  • Financial Conduct Authority (FCA)
  • Investment Industry Regulatory Organization of Canada (IIROC)
  • Commodity Futures Trading Commission (CFTC)

Oanda protects its clients as much as is required by regulators. However, it doesn’t provide any additional protection. Not every client will be fully protected in the event of default. Since the platform has never been involved in a scandal and it is transparent, there hasn’t been any reason to believe that their security measures are not perfect.

Commissions and Fees

One of the major reasons OANDA is popular is that it doesn’t take any percentage of your money as commission. However, you may need to pay a token spread on your quotes. The amount of the spread isn’t fixed. It depends on the asset you want to trade and the market conditions at the time you make the quote.

Irrespective of the asset class and the market conditions, their spreads are still competitive. Typically at par or better than what its close competitors, FXCM and Pepperstone, offer. Also, the platform makes it easy for players to see the current spreads and the historical average spreads, which makes the pricing more transparent.

More notable, Oanda has no limits on the initial investment and industry average spreads. Also, as you deposit and trade more at Oanda, you will at one point be invited to join a program that provides cheaper than regular spreads.

Oanda does not charge an account inactivity fee, just like FXCM and Pepperstone, but you will be charged if your account stays inactive for a long period.

Mobile Experience

The ability to enter and exit trading positions is extremely useful for FX traders who are always on the go. OANDA has a mobile app that is available for download on Google and Apple app stores. Also, the Oanda mobile FxTrade platform is fully optimized for seamless loading on iPhones, Android, and Windows mobile devices.

The mobile platform gives you nearly all the perks of the PCs platform, including the ability to download historical quotes; speculating on NASDAQ, FTSE 100, Oanda trading tools, spread history, as well as the ability to place complex orders. The mobile platform allows you to trade directly from charts enriched with price overlays and indicators.

The great thing about the desktop app is that it also provides trading insights that help you make informed decisions.

The mobile interface is user-friendly and easy to navigate. The transition from Oanda desktop website to Oanda mobile platform is hassle-free. You will also have the ability to adjust and change display styles to match your preferred trading style on PCs.

Opening an Account

Account opening on OANDA is straightforward and intuitive. The website does not have a minimum deposit limit, but the sales team is a bit pushy. The broker accepts registration from many countries around the world, with a few exceptions including South Korea, India, Turkey, India, New Zealand.

Visit the website, and you’ll see an option to either open a trading or demo account.

The demo account comes with $10000 virtual cash, and it doesn’t have a time limit. This is a great advantage because unlike most Forex brokers who limit the lifespan of your demo account, Oanda allows you to practice as long as you need to horn your strategy and build the momentum you need for real money trading.

When you click on the trading account button, you’ll see an option to choose your country of residence. You can open one account, but the platforms allow you to create up to 19 sub-accounts. The sub-accounts support different currencies such as GBP, EUR, USD and more.

This would be followed by a form. Provide your details, accept the terms and conditions and open the account. It can be done within a few minutes, but the account may take days to be approved. Note that you will be required to provide a photo of your government-issued ID card and proof of residence.

Deposits and Withdrawal Options

Oanda supports a melange of deposit and withdrawal options, but availability may vary depending on your country of residence. The first deposit is free if made via bank-issued cards. Onda supports up to 8 base currencies which ranks it competitively compared to FXCM, which supports 7 base currencies and Pepperstone, which supports 10 options.

The base currency matters because if you load your account using it, then you won’t have to incur currency conversion fees. Another convenient way seasoned traders use to reduce losses on currency conversions is to open the multi-currencies bank account. For example, Tansferwise and Revolut both offer multi-currency bank accounts with favourable exchange rates and lower international bank transfer fees.

United States residents have access to checks, bank wire transfer, and debit cards on Oanda. Canadian residents have access to PayPal, bank wire transfer, and credit cards.European residents have access to debit cards, credit card, internet banking, bank wire transfer, BACS and SEPA.

Australian and Asian traders have access to BPay, bank wire transfer, credit cards, PayPal, debit cards, China UnionPay, DBS Pay Bills. Withdrawals can take 1 to 2 business days on a domestic level and about 5 business days on an international level.

Withdrawal fees depend on the amount you want to withdrawal and the method you are using.

Investment Products

OANDA doesn’t just offer trading services. It also offers investment products, which include indexes, bonds, commodities, precious metals, and forex. The platform offers 52 CFDs, and this is poor when you compare OANDA with other major brokers who offer between 1,000 to 10,000 CFDs.

Research Tools and Insights

This platform offers extensive real-time news feeds, economic analysis, advanced data analytics, calendars, pattern matching engines, volatility analysis, etc. There is a lot of information on the website, which may be difficult for beginners to sort through. Advanced traders, on the other hand, will not have a problem utilizing the resources. There is also a forum that allows traders to communicate with each other. However, the platform doesn’t have social investing tools available at this time.

Education

Apart from the comprehensive insights for traders, the platform has educational resources that are grouped into four: basic trading education (an educational series for beginners), trading analysis introduction (also for beginners), capital management (for new and old traders who have interest in their investment products), webinars, and live classrooms.

Special Features

OANDA has a currency converting tool that allows traders to check variations in exchange rates automatically. It also offers forex payments to corporate clients. The exchange allows users to enjoy the MetaTrader4 platform, which is now a favourite among traders because of its efficiency and reliability. Unlike many other brokers, OANDA has built-in programming language. The platform is incredibly fast, with traders completing transactions within 0.077 seconds. Also, the platform isn’t just available in English. Traders can switch to German, French, Chinese, Portuguese, Russian, Japanese, Italian, and Spanish. Traders who want to use the MetaTrader 4 platform have the option to choose from 17 different languages.

Final Thoughts

While OANDA is primarily ideal for advanced traders, beginners are welcome to use the platform. They can take full advantage of the tools and educational resources available on the platform. However, if you’re interested in trading cryptocurrencies, you will not have access to this service on OANDA. Also, the fact that there is no negative balance or account spillage is discouraging.

On a scale of one to ten, OANDA scores an eight. It is fast, reliable and regulatory compliant. OANDA has bagged several awards over the years. In 2020, it won the Most Preferred CFD Provider award, Singapore ShareInvestor Award, Best Value for Money award. It was awarded the Highest Overall Client Satisfaction, World’s Best Retail FX Platform award, Best Customer Service and Best Mobile Platform award in 2020. In 2020, the broker won the Best CFD Broker APAC, Best Trade Execution Provider, and Global Banking & Finance, Review Awards.

There have been many other awards over the years, but all of them prove one thing, OANDA is a reputable broker and traders are fully aware of this fact.

Best Binary Options Brokers 2020:
  • Binarium
    Binarium

    Best Binary Options Broker 2020!
    Free Trading Education!
    Free Demo Account!
    Perfect for Beginners!

  • Binomo
    Binomo

    2 place in the ranking!

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