The Truth on Binary Options
I have been dealing in binary options for over 10 years now having started with Betonmarkets which is now known as Binary.com
For those of you who are located in the United States, Nadex is your only real option. It is legitimate and CFTC regulated.
The site acts as an exchange so they make money on a small commission for each trade. (.90 per side nothing on a losing trade).
At the end of the year you would get a profit/loss statement from Nadex which is also sent to the IRS. So they as legit as a stock broker. Nadex is VERY small though. It is ONLY available to US clients. They are owned by IG which is a LARGE UK company that deals in binary options/spread trading.
So that is the LEGIT side of things.
As far as the other brokers the ones that I won’t mention for back lash. Trust me I have had a TON of run ins with them.
I use to be an affiliate for the scammy brokers before I figured out what was going on.
90% of the binary options brokers all use the same 2-3 companies software from spotoption and tradelogic though their are some smaller ones as well.
You can OWN your own bo brokerage for as little as $10000 they will set you up so you can start taking deposits etc.. No you don’t have to have money on the side to pay out the winners.
It can be TOTALLY shady particularly if you are dealing with unregulated outfits!
They make money on CLIENT LOSES PERIOD! Just like a sports book.
That is the best example of how it works really. In a regular sports book casino they pay say 90% to the winner. The sports book sets the line at say -7 on team A.
The GOAL for the sportsbook is to get the same amount bet on both sides. So say 1000 is bet on the Team A and 1000 is bet on team B. The sportsbook wins. Because they pay out the winners with the losers money and keep the 10%.
If their ends up being more betting on one side or the other they will move the line to say -6 or -8 so more people will come in on the other side to even it out.
Which is fine for sports for a game that hasn’t started yet.
It doesn’t work that way in the markets though although they try it.
So in binary options they want the same 1000 on the buy side and 1000 on the sell side. They pay out say 75% and pocket the 25%.
The problem comes in when you have 5000 come in on the buy side and only 1000 on the downside. Well if the BUY side wins they don’t have the money to pay out the winners. So like a sports book they will change the line.
So if they have 5000 on the buy side and you are trading the Dow they will say the DOW is actually at a price 10 points higher then it actually is. Even though the DOW ISN’T at that price. If money CONTINUES to pour in on that side they hopefully will make it up when the Dow only goes up 5 points. It would be like the sportsbook DURING the game say the score is ACTUALLY 21-7 WHEN it really is tied 7-7.
I have seen as much as 150 point spreads on the Dow before. WHY because I have a group of traders that ALL do the same thing at the SAME time. So what happens is you get a flood of traders and the binary options outfit freak out and put in the spreads.
I have seen spreads on ALL the overseas binary options brokers I have used and I have used probably 15+ of them over the years.
Binary options exploded in growth in the last 3 years because the barrier to entry is so small. The small amount you need to open your own “brokerage” and get TONS of money flowing your way is insane.
Just look up some of the publicly traded binary options brokers Win Global which owns eztrader global option and others they lost almost 1 million dollars the first 1/2 of 2013. You really want to deposit money in a brokerage that lost almost a million in 2013? Symbol wgmi otcbb
Another one you can look at ciix which had a partnership with one binary options company that screwed them and their clients so bad by not paying them. You can find it in their annual and quarterly reports.
The overseas binary options brokers make money when clients LOSE. PERIOD. That is why they do spreads. If it’s ALL about volume like they say then they should put the Dow at 10000 and they would have all kinds of volume. But no they do spreads, they put bonuses on people so you can’t get your money out.
Some told me once they had to trade almost 1/2 million dollars in order to deal with the bonus offer. That is NUTS this wasn’t even that big of account. And even if they did these companies DON’T have the money to pay out. That is why some of them are closing one just over the last month or so.
More crack down will happen on the shady ones in the future I am sure.
I also told clients not to get bonuses etc… Always, always, always investigate the offer thoroughly and trade with a registered broker.
I LOVE BINARY OPTIONS but not the scammy kind.
Stick with the regulated outfits like Binary.com
by Steve H.