Below is a table comparing all the different binary options brokers with the goal of helping you find the best one for your needs. We look at the profit payout, out of money refund, minimum deposit and if they accept US clients.
|Out-of-the-Money Refund||Minimum Deposit||US Citizens|
|Stock Pair||78% to 86%||0% to 3%||$100||YES|
|TraderXP||66% to 75%||10%||$100||YES|
|Banc de Binary||66% to 75%||10%||$200||NO|
|Zone Options||70% to 85%||0% to 15%||$200||NO|
|Option Fair||70% to 85%||0% to 15%||$200||NO|
|iOption||70% to 85%||2% to 15%||$250||YES|
|24 Option||70% to 85%||0% to 15%||$250||YES|
|Option Bit||75% to 81%||0%||$200||YES|
|Options Click||70% to 85%||0% to 15%||$200||YES|
|Ikko Trader||70% to 85%||2 to 15%||$200||YES|
|Trade Rush||70% to 85%||2% to 15%||$200||YES|
|Zoom Trader||75% to 81%||0%||$100||YES|
|GT Options||70% to 90%||0% to 10%||$200||YES|
|Opteck||75% to 85%||0%||$200||YES|
|Anyoption||65% to 71%||15%||$200||YES|
Binary options are one of the newest ways of trading a variety of financial instruments, from forex to single shares to indices. They are also called two-way options, a name which describes exactly how they work.
With most other investments, if you think the market is going up you would buy. The amount you make then depends upon the amount that your underlying investment goes up by. For example, if you bought shares at $10 and they improve to $11 you make $1 per share, or 10%. With binary options you only have to get the direction right to make your profit. Most binary options companies offer a payout ratio of around 70%. In other words, if that $10 share finishes at $11 during the term of the investment your profit will be 70%, not 10%.
The downside is that if the share (or other financial instrument) finishes below $10 then you lose 100% (though some firms will offer a rebate, or refund, on an out of the market option while it is still trading).
You can also bet on a downward moving price by selling instead of buying.
Binary options are specifically designed for short term traders, sometime a matter of minutes, and so profits and losses can be made very quickly. They are electronically traded through a screen based binary options broker.
There are plenty of brokers available to choose from, though most offerings are very similar. The choice may come down to range of financial instruments, profit payout ratios, and refunds available if you want to close out an out-of-the market option.
Binary Options Pairs
A development from vanilla binary options is the binary options pair. With this trade you simply select what you think will be the better performing of two similar stocks. For example, Vodafone and TMobile maybe a pair available on a binary option platform: if you bet that Vodafone will perform better than TMobile over the day then you will profit by the relevant payout. Pairs trades can pay out profits in the hundreds of percentage points range.
Binary Touch Options
Touch options pay out in a similar way to vanilla binary options, though the price of the underlying instrument doesn’t have to finish above or below the price at which the binary was opened. With a touch option, the trader will be paid out providing the high or low price has been touched during the time that the option is live. For example, if stock ABC is trading at $90, and you believe that it will trade at $94 dollars or above then you might decide to open a touch option at $94. If the stock hits $94, you will be paid out.
Most brokers allow you to build your own option, where you select the price, and time till expiry. This type of binary option facility can be particularly useful if you are using binaries options for hedging purposes on other trading strategies.
Many binary options brokers use the same platform to enable trading, so there is little to choose between them on this basis. Some firms have developed their own proprietary trading systems, with downloadable software, though most firms offer a web based trading system and mobile device access.
However, where these brokers do differ is factors like profit payouts, out-of-the-money refunds, and minimum deposits. Minimum trade sizes vary according to instruments traded.
The table below compares 10 of the largest and most reputable binary options traders, helping you to make an informed decision about who to place your binary options trades through.
The bottom line
Binary options are a type of derivative instrument, and carry a high risk. The risk is that you could lose 100% of your original investment. However, they are very easy to understand and trade through specialist brokers.
The risk may be high, but so too are the potential profits. Because of the way they work, it is easy to quantify the risks and rewards in a number of different scenarios. With two potential outcomes, even the complete novoce has a 50% chance of being right on any given binary option position.