Binary options is a new market instrument that emerged in the XXI century, which refers to over-the-counter derivatives. The lack of proper regulation, interest in the implementation of contracts on the part of world exchanges, numerous abuses of customer trust by pseudo-brokers have led to the formation of persistent stereotypes.
Despite the fact that in 2008, the spread of binary options led to the creation of new hedging strategies, by the end of the second decade, the actions of attackers forced many market trading participants to consider contracts a priori unworthy of attention and study.
The list of stereotypes contains common misconceptions, ranging from innocent theories to specific taboos.
Binary options are issued on Forex currency pairs
Brokers Forex - the first who took part in the distribution of binary options, which was the reason for the formation of a stereotype.
The contract design is two types of conditions under which a premium is paid or a loss is fixed, depending on the position of the price of the underlying asset at the time of expiration. Instead of an asset, is substituted currencies, securities, commodities, weather conditions, results of political elections and referendums, etc.
Specialized financial companies have expanded the range of binary options to a list of 2000 instruments for which they are ready to issue a contract.
Only gaming licenses are issued for binary options
Offshore states sometimes transfer the regulation of binary options to gambling commissions. The stereotype of the presence of a bet on an event in the transaction is triggered and the benefit from such a representation is for the company, which is easier to obtain a license.
In developed countries, binary options are regulated by financial authorities overseeing exchange trading. In the United States, trading permits are issued by the Securities Commission SEC or Commodity Futures CFTC, binary options are traded on CME and NADEX.
If y the broker has a special license from CySEC (Cyprus), it can legally trade binary contracts throughout the European Union and countries that recognize the legal force of this document. Forex and options in the UK are supervised by the same agency – the FSA.
Binary options are traded by scammers
Over the past five years, 90% of Forex brokers have "acquired" binary options, both with a reputation of reliable brands and newcomers in this segment. Investment banks associated with the currency market also offer this tool to their clients.
The turnover and distribution of binary options are dictated by the platforms in the United States: NADEX and CME, which allow you to safely trade contracts in the terminals of brokers associated with these exchanges.
Binary options are a casino because of unpredictability
Most traders believe that the need to choose the expiration date of a binary option contract introduces an element of unpredictability. This is a stereotype – any transaction and signal are limited by time, because the movement of the market price is subject to cycles.
Derivative contracts - futures and vanilla options , divided into time intervals (from a week to a month), have been traded on the markets for the fifth decade. Long-term binary options are offered by brokers with a time step equivalent to these assets.
Trading strategies within the day are also divided by the zones of activity of traders that coincide with the opening hours of the world exchanges. Scalping automated terminals contain special settings that forcibly close open trades a few minutes after entry.
Therefore, almost all stock exchange strategies are tied to time. Given that this parameter can be adjusted in American binary options, the trader needs additional research and tests to learn how to adapt strategies for this parameter.
Binary options are a "kitchen"
Kitchen in the slang of traders is called the organization of trade, in which the opposite side of the transaction is occupied by a broker. This situation is dangerous because the company wants to maximize profits and solve disputes "in its own direction".
The binary options market is 90% based on the organization of "internal trading" for the reason:
- low liquidity, large banks are not interested in providing liquidity for this type of contracts; statistical benefits – most traders lose, the company benefits from taking a "betting position";
- lack of widespread interest in binary options.
The principle of organizing trades between traders and a broker came from the first Forex dealers. At the stage of formation of electronic currency trading, companies "robbed" their first customers, according to the "kitchen"principle. The development of the market, competition, the growth of education and professionalism of users forced brokers to remove dealing boards from terminals, use liquidity providers, automatically withdraw orders on the interbank market.