Are binary options legal?

binary options legal

When searching for the keywords ‘binary options’, you often find articles with the title ‘Binary Options is Gambling’ or ‘Are binary options even legal?’.

Some of these articles even say that the binary options brokers are scam. How comes?

What are binary options?

Binary Options are very simple to understand, this is why there are some many people with no prior experience, who try their luck with binaries. Most of the time you have a ‘high-low’ options also called ‘call-put’. You basically have to invest your money on the predicted market direction.

There is an expiry date and there is a strike price: this is the price at the moment of the purchase of the option.

Lets say you pick the  USD/EUR pair. If you think that the USD will increase compared to the EUR, the you buy a ‘put’. If you think the EUR will increase then you buy a ‘call’. When the option expires, the current price will be compared to the strike price, and this will decide the outcome.

Why are binary options sometimes considered scam?

Unfortunately, like in every market, there are black sheep in the industry. These are usually new companies that are around for a few weeks and then disappear.

Be assured that we only recommend regulated and trustworthy brokers that have been around for some time. Most of these brokers are authorized by CYSEC.

Another possible reason why binary options is considered scam, is that some brokers promise too much. It’s true that you can make a lot of money, in very short time and while this is very true with binary options, you should also know that you can lose a lot of money in short time. So be very careful when making your first trade.

Most articles are outdated

One of the best examples is the binary options article on Forbes written by Gordon Pape, with the title ‘Don’t Gamble On Binary Options’. You can find a great article on binary options on Invezz.

Even though Forbes is a very respected website, it does contain some outdated information, which should be updated as soon as possible. Mr. Pape talks about the brokers not being regulated, but in reality the brokers have been regulated for years by agencies like CySec. That article was written obviously before the regulations started.

Pape also circumcises the way brokers earn their commission. Binary brokers do take a commission on the trades, otherwise it wouldn’t be worth it to build such complex platforms for users if it was free. The commission structure is similar to online poker, which could be another reason why binary trading is often considered gambling. In the end it’s up to the user if he wants to risk his money or not.

10 November 2014 by Matteka Anderson