Binary Options Introduction

Binary Options are a type of investment instrument that can be traded electronically both over-the-counter (off-exchange) and on regulated exchanges (on-exchange), through online brokers.

These contracts are an increasingly popular form of trading and provide investors and speculators (traders) the ability to have potential risk/reward exposure to an underlying asset. This type of investment exposure includes certain unique characteristics with regards to time and other conditions, as will be explained below.

While the regulatory status with regards to binary options varies per jurisdiction, the space is growing and evolving at a steady pace. The Financial Commission as part of its mission statement aims to provide traders with educational content to help better their understanding of this type of trading instrument. The next section will compare some differences within options.

Not all Options are Created Equal

Buying options typically conveys the right – but not the obligation – to buy or sell an underlying asset at a specified price, and which can be exercised within a certain duration of time (with key differences between how American and European style options can be exercised) until the expiration date is reached.

Binary options share many similarities with traditional options, yet have many components that have been removed from the equation by incorporating pre-determined criteria into the process to simplify it.

Therefore while trading stock options is often for more advanced traders and is more complex in nature, Binary Options offer an easy way for the  beginner trader to learn about speculating in the financial markets. At the same time there are still some key parallels with regards to options that every trader should know, such as the time component as will be detailed next.

All Options Have an Expiration Date

One common theme all options share is that they are a wasting asset. This means that they expire worthless if not exercised (and if they are not in-the-money or passed their break-even point), and are either cash-settled or deliver a multiplier of the underlying asset (i.e. 100 shares, etc…).

In essence this time component means that the time value ticks away and degrades over time regardless of market conditions, and therefore choosing the right amount of time (duration until expiry) is an important element of timing an option trade correctly.

For this reasons it’s crucial to understand the particular options contract specification, and how your broker processes any profits or break-even scenarios which may be either automatically paid out upon or before expiration and/or whether the contracts can be manually exercised before or at expiration.

With binary options this entire process is typically very simple (when compared to trading stock options) and can be clarified by your broker, but it’s a good ideas to see it in writing – normally in the account agreement or product listing under the contract/instrument specifications so there is no uncertainty .

How are Binary Options Different?

Binary Options simplify the often complex dimensions of risk characteristics that traditional options trading carries, by creating only two possible outcomes – either a profit or a loss – hence the dualistic name “Binary” which has been appropriately designated to these option contracts (keep in mind that a third outcome is possible in some cases if a trade reaches a break-even outcome and there is neither a profit or loss.)

This simplification enables traders of nearly all experience levels to understand the basics of binary options trading without having to learn the complexities of traditional options investing which can include premiums that change in value over time, time-value, and intrinsic and extrinsic value, as well as the historical and implied volatility of the underlying asset, all factors that can directly affect the options value over time.

With Binary Options nearly all of those components are removed and the focus is entirely on the payoff and break-even price since this will enable a trader to gauge how much to risk based on the trade size and depending on their outlook of the underlying asset over time. Time is of course a key part as well, and typically is chosen based on the outlook of the investors, with regards to their view on the underlying assets.

What is the Payoff?

With binary options the return component is typically called the “pay-off” where the value can be either zero or positive, and both of which are known in advance. In essence the payoff is the result of the trade and depends on whether the binary option trade becomes in-the-money by surpassing its break-even price, and if not the cost of the investment is the loss generated on the trade.

Therefore, a trader who establishes a bullish trade or “call” with a $50 payoff, can expect to make a $50 return if the price of the underlying asset increases over a specific rate – say for example $6.50 (for the price of an underlying stock), within a fixed period of time (i.e. 60 seconds, 60 minutes, 1 week, etc..) .

In such a scenario there are two main outcomes: either both the $6.50 price is surpassed and the trade realizes a $50 profit on the $50 capital investment (100% return), or if the price is not reached – thus there is a $50 loss (100% loss).

However, in some cases (varies per broker) if the call price of $6.50 is reached exactly and doesn’t increase any tick higher from that break-even point, then the cost of the trade is returned (i.e. the trader will receive his initial cost back and has a 0% gain or loss) where the trade is flat with a break-even return.

Customer should fully understand the characteristics of binary options and the often unique features or policies that their brokerage may have with regards to how orders are handled, and how positions and options contracts function, including the various possible outcomes that can result from trading binary options.

The Financial Commission aims to provide educational content to traders, such as the information above, to support a key part of our mission statement. For more information please contact us.

December 15, 2014 Hong Kong and New York: Financial Commission has today announced the successful completion of certifying the IBinex platform for Cryptocurrency trading.

The announcement follows a thorough review of the IBinex trading platform where the Financial Commission certified the IBinex Cryptocurrency Exchange based on a detailed set of criteria and requirements as outlined in its guidelines. This milestone for IBinex enables its solution to be available to member firms of the Commission, as a certified platform.

The news follows the initial launch of the Cryptocurrency Financial Commission (CFC) division earlier this year by the Financial Commission, and the subsequent collaboration to provide outsourced regulatory and compliance oversight to iBinex ahead of its planned 2015 launch.

Purpose of Certification is to Verify a Minimum Set of Criteria for Member Firms

As traders are increasingly looking for opportunities to speculate across various assets, the newly emerged digital currency or cryptocurrency market has already proven to be an interesting area and appealing for investors, traders, and those who believe digital currencies may replace fiat currency in the future.

Like any newly developing market, cryptocurrencies have already faced a number of challenges with some prominent Bitcoin exchanges going out of business, and various hacks, thefts, and related frauds ensuing in various parts of the world.  This has led to regulators and lawmakers investigating how to approach this industry, and consequently is causing new ways for companies and clients to contemplate how to best protect themselves amid these concerns.

With this in mind, the Financial Commission is working closely with its Dispute Resolution Committee (DRC) and experts in the digital currency field, and firms such as IBinex to examine best-practices with regards to cryptocurrency offerings, so that online brokers and their traders can find a suitable solution.

Parallels Between Certifying Forex, Binary Options and Cryptocurrency Solutions

While the process for certifying technology for Cryptocurrency trading may differ from forex or binary options trading platforms, the essence is the same with regards to helping to ensure that high standards of execution and order processing are maintained, in addition to other important standards that member firms must uphold.

These and other key areas that are reviewed include elements related to price discovery, disaster and recovery procedures, security, data encryption, stress-tests, and system update-procedures, and other items within the technology infrastructure of a broker/exchange or technology-developer.

Since the Financial Commission needs to confirm that its supervisory capabilities are applicable in such cases, it requires that brokers or technology developers uphold certain standards that meet its certification requirements to help ensure that a minimum set of guidelines are in place for customers.

IBinex Joins List of Certified Platforms by the Commission

Ibinex_Logo The certification of IBinex marks the first Cryptocurrency exchange that has joined the Financial Commissions list of certified platforms.

 

Operated by FinaCom PLC, the Financial Commission is the first neutral 3rd party dispute resolution organization, and provides its member-firms and their clients the ability to resolve disputes using the most efficient process currently available, thanks to the organizations unique structure.

To learn more about certified platforms such as IBinex and how the Financial Commission operates, more information can be found under the Platform Certification section on FinancialCommission.org

December 15, 2014 Hong Kong and New York: Financial Commission has today announced the successful completion of certifying the IBinex platform for Cryptocurrency trading.

The announcement follows a thorough review of the IBinex trading platform where the Financial Commission certified the IBinex Cryptocurrency Exchange based on a detailed set of criteria and requirements as outlined in its guidelines. This milestone for IBinex enables its solution to be available to member firms of the Commission, as a certified platform.

The news follows the initial launch of the Cryptocurrency Financial Commission (CFC) division earlier this year by the Financial Commission, and the subsequent collaboration to provide outsourced regulatory and compliance oversight to iBinex ahead of its planned 2015 launch.

Purpose of Certification is to Verify a Minimum Set of Criteria for Member Firms

As traders are increasingly looking for opportunities to speculate across various assets, the newly emerged digital currency or cryptocurrency market has already proven to be an interesting area and appealing for investors, traders, and those who believe digital currencies may replace fiat currency in the future.

Like any newly developing market, cryptocurrencies have already faced a number of challenges with some prominent Bitcoin exchanges going out of business, and various hacks, thefts, and related frauds ensuing in various parts of the world.  This has led to regulators and lawmakers investigating how to approach this industry, and consequently is causing new ways for companies and clients to contemplate how to best protect themselves amid these concerns.

With this in mind, the Financial Commission is working closely with its Dispute Resolution Committee (DRC) and experts in the digital currency field, and firms such as IBinex to examine best-practices with regards to cryptocurrency offerings, so that online brokers and their traders can find a suitable solution.

Parallels Between Certifying Forex, Binary Options and Cryptocurrency Solutions

While the process for certifying technology for Cryptocurrency trading may differ from forex or binary options trading platforms, the essence is the same with regards to helping to ensure that high standards of execution and order processing are maintained, in addition to other important standards that member firms must uphold.

These and other key areas that are reviewed include elements related to price discovery, disaster and recovery procedures, security, data encryption, stress-tests, and system update-procedures, and other items within the technology infrastructure of a broker/exchange or technology-developer.

Since the Financial Commission needs to confirm that its supervisory capabilities are applicable in such cases, it requires that brokers or technology developers uphold certain standards that meet its certification requirements to help ensure that a minimum set of guidelines are in place for customers.

IBinex Joins List of Certified Platforms by the Commission

Ibinex_Logo The certification of IBinex marks the first Cryptocurrency exchange that has joined the Financial Commissions list of certified platforms.

 

Operated by FinaCom PLC, the Financial Commission is the first neutral 3rd party dispute resolution organization, and provides its member-firms and their clients the ability to resolve disputes using the most efficient process currently available, thanks to the organizations unique structure.

To learn more about certified platforms such as IBinex and how the Financial Commission operates, more information can be found under the Platform Certification section on FinancialCommission.org

The Financial Commission is delighted to welcome Zack Ioannou as the new Head of the Dispute Resolution Committee (DRC). The DRC is the heart of the Commission and the body, which oversees the dispute resolution process from end to end. Financial Commission strives to gather all the top figures of the industry to be part of the core team of the Commission in general and the DRC in particular. Experience in everything, and this is especially true in the world of finance and trading; and this appointment of Zack as the Head of the DRC is no exception.

Zack has over 25 years of financial markets experience gained in senior roles at investment banks such as Smith Barney and Wells Fargo, as well as at securities and brokerage firms such as FxPro and Easy Forex. He has established and developed financial trading businesses and brokerages covering a broad range of markets serving institutional and retail clients.  His background includes market making, proprietary trading, risk management, sales and business development, regulatory compliance, finance and operational management. Zack is registered with the FCA in the UK and the CySEC in Cyprus.

The DRC members come from various backgrounds, which come together to create a diverse framework for the resolution of any dispute, with one common thread: the recognition that knowledge and hands-on experience are key traits to the function of the DRC.

We are honored to welcome Zack Ioannou to this top role within the DRC, and are proud of this addition to the Commission.

About the Financial Commission:

The Financial Commission is an external dispute resolution (EDR) organization for consumers/traders who are unable to resolve disputes with financial services providers that are members of the Financial Commission. The Financial Commission set out to provide a new approach for traders and brokers alike to resolve any issues that arise in the course of trading the Forex market. The Financial Commission was established to be a neutral 3rd party committee to fairly review and resolve complaints in an effort to facilitate a simpler, swifter resolution than through industry regulators and the legal system

For more information, please contact The Financial Commission – [email protected] or by phone 212-655-5493

The Financial Commission is delighted to welcome Zack Ioannou as the new Head of the Dispute Resolution Committee (DRC). The DRC is the heart of the Commission and the body, which oversees the dispute resolution process from end to end. Financial Commission strives to gather all the top figures of the industry to be part of the core team of the Commission in general and the DRC in particular. Experience in everything, and this is especially true in the world of finance and trading; and this appointment of Zack as the Head of the DRC is no exception.

Zack has over 25 years of financial markets experience gained in senior roles at investment banks such as Smith Barney and Wells Fargo, as well as at securities and brokerage firms such as FxPro and Easy Forex. He has established and developed financial trading businesses and brokerages covering a broad range of markets serving institutional and retail clients.  His background includes market making, proprietary trading, risk management, sales and business development, regulatory compliance, finance and operational management. Zack is registered with the FCA in the UK and the CySEC in Cyprus.

The DRC members come from various backgrounds, which come together to create a diverse framework for the resolution of any dispute, with one common thread: the recognition that knowledge and hands-on experience are key traits to the function of the DRC.

We are honored to welcome Zack Ioannou to this top role within the DRC, and are proud of this addition to the Commission.

About the Financial Commission:

The Financial Commission is an external dispute resolution (EDR) organization for consumers/traders who are unable to resolve disputes with financial services providers that are members of the Financial Commission. The Financial Commission set out to provide a new approach for traders and brokers alike to resolve any issues that arise in the course of trading the Forex market. The Financial Commission was established to be a neutral 3rd party committee to fairly review and resolve complaints in an effort to facilitate a simpler, swifter resolution than through industry regulators and the legal system

For more information, please contact The Financial Commission – [email protected] or by phone 212-655-5493