Whenever something attracts a big audience, very soon the reporting media and competitors leap to investigate and plot the course of events to their advantage. Recently, a lot of talk about the legitimacy of binary options trading has surfaced in the mass media. People are asking: Are Binary Options Legit? Some people complain it’s a scam, while others criticize it as a kind of gambling!
In order to have an informed opinion about whether trading in binary options is legit or not, let’s first take a brief look at what binary options trading is, as well as its regulatory history because its the regulatory aspect of the industry that makes binary options legit.
What are Binary Options and how do they work?
A binary options contract is a simple to use financial instrument that gives the ability to make money from global financial markets. As the name denotes “binary options” are concerned with two choices. When trading your money in binary options, you do not buy or sell anything. You invest an amount of your money on an underlying asset that you choose from a list of assets (Currencies, Stocks, Commodities, Indices), and the contract is defined by a time limit. The contract is also defined by what you believe will be the price of that underlying asset at the expiry time. Therefore, before you make the contract, you need to come to a decision about the future trends for the price, or market value in other words, of the assets you are interested in.
In order to secure your trade, you need to invest a sum of money through the online trading platform when you choose a contract at any given moment. The broker will then place the trade on your behalf. Once the stipulated timeframe is up, if you chose the underlying asset’s price movement correctly, then you will be paid a fixed return regardless of how much the price has moved. On the other hand, if you chose the price movement incorrectly, then you will only lose your fixed investment. The return on your investment is known at the moment the contract is made.
If the price has moved in the direction you specified by the contract expiry time, then you will be “in the money”. Conversely, if the price has actually moved in the opposite direction by the contract expiry then you will be “out of the money.”
Binary Options and Regulation
In the beginning, the regulatory framework for the binary options industry was almost non-existent and there was no separate financially liquid market for binary Options. Traders were only offered fractions of larger more complex contracts. That is how things stood until the sub-prime mortgage market crisis and the crash of real estate values in 2007 in the US. The binary options industry was born in 2008 on the floor of the Chicago Board Options Exchange (CBOE), which had been established in 1973. The financial crisis led to calls for investment with a lower risk profile of course and this was the situation that gave rise to the binary options industry in the beginning. However, this was not to be confined to the rich and institutional investors only, but was soon made available to ordinary folk who want to make profits from the financial markets.
The year 2008 was a disaster for the global financial system. Banks such as Bear Stearns and Lehman Brothers were declared bankrupt. Every day that year companies and individuals were counting capital and investment losses amounting to millions. Stock markets tumbled, the Dow Jones Industrial Average, for example, fell from 14,000 to 11,000 points in the space of ten months. The sub-prime mortgage scandal in the US showed that the blame for the 2008 financial crisis belongs to those who regard real-estate, and particularly housing, as a profit generator – rather than a home. Binary options trading has grown in popularity and success because it is a profit generator which anyone can use.
Regulatory Reform makes Binary Options Legit
The Options Clearing Committee (OCC), which had been developing the regulatory framework since the 1970s, proposed reforms which were aimed at elevating the binary options industry and to make it possible for assets to be traded in the chief exchanges. The US Securities and Exchange Commission (SEC) recognized the virtues of the OCC’s recommendations for reform and made it possible for binary options to be offered as a stand-alone tradeable financial instrument. The American Stock Exchange (AMEX) began offering binary options to the public in June 2007. The CBOE now has a yearly trading volume circa 1.3 billion contracts. Regulations like these make binary options legit.
Why trade with Stern Options?
Stern Options is a trusted broker with many years of experience in the binary options trading industry. They offer a world-class online trading platform that is kept up to date on both an algorithmic level and a technical level. Stern offers unparalleled customer service that includes a free-to-use training academy, providing instruction into the theory and practice sides in order to help you trade successfully. Stern’s mission and motto is “professionalism developed over the years at your service.” It is clear that what is on offer by Stern Options actually demonstrates that they have thought seriously about what professionalism means from the client’s point of view as well.
Conclusion- Is Binary Options Legit?
From the above, it is logical to conclude binary options trading is a legitimate way to invest and make profits from the global financial markets. However, there are companies who are not in this industry for you but for themselves only. This does not mean the industry is a scam though, but that you must choose carefully which company you partner with. Stern Options is a logical company to start with.