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What is Binary Options Software?
Binary options software is simply software that helps you execute binary trades. Similarly to other strategies such as day trading, binary option software can be broken down into three main categories: data, charting. and trade execution. If you are a smart investor, and due your due diligence – which you must be if you are reading this – you will often come across articles or reviews on binary robots. This is an example of trade execution software, which will be discussed further down.
Despite the plethora of information available on automated binary trading systems, you shouldn’t let that one concept over shadow data and charts. At the end of the day all three elements of binary options software are equally important in developing a successful binary options trading strategy. (For an introduction on trading strategies check out our page on the subject – Binary Options Trading Strategies)
3 Main Categories for Binary Options Trading Software.
- Data – This is simple as it sounds. Most exchanges prefer to interact with 3rd party companies that aggregate market data and distribute it to greater investment community. When you are trading binary options, you need to know the prices of commodities, stocks, indices or currency pairs you want to trade. The way you do this is by utilizing software that displays all the data you need when you need it. Binary signal software is a tool worth integrating into your binary options strategy.
An individual investor does have access to a limited of data, however, this is not alway real time and doesn’t provide easy access to historical information – important analyzing trends over time. Its also important to keep in mind that many free data providers don’t provide real time data – rendering the information practically useless to binary option traders. NASDAQ, the second largest exchange in the world (NYSE is the largest), has a portal on its website listing approved vendors for its data as well as detailing the benefits of 3rd party data vendors.
Luckily for binary options traders, most binary options platforms provide accurate real time data to account holders through an approved market vendor such as Thomson Reuters. (See Figure 1)
- Charts – In the world of trading data and charts go hand in hand. To such an extent, in fact, that most data providers will display data in a chart so the invest can easily make sense of the enormous of amount of information.
The above image shows you the interface trading interface on iq option. As you can see by signing up for an account on iq option, you receive access to 2 of 3 types of binary options trading software: data and charting.
As you must know by now, it is not enough to an enticing image. Shop around and see which platform provides you with the opportunity to implement your investment strategy. It is also a good idea to open a demo account before you begin committing considerable sums of money to any one platform. This give you an opportunity to familiarize yourself with specific binary trading software each platform utilizes.
- Trade Execution – You have all the data, and you’ve charted historical trends, now what do you do? You execute the trade. After all that’s what we are all here for: to earn extra cash trading binary options!
You can execute the a binary options trade on any binary options platform. Many platforms offer an array of trades from a simple CALL/PUT option to a more complicated, but more rewarding, one touch option. Or, you can employ a binary options trading robot to automatically execute trades. Binary robots are binary options software which focus solely on executing trades. There are many different brands of binary robots. Almost all of them allow you to configure the types of trades you want to execute down to the level of risk, underlying asset, value per trade etc. This can be a winning binary options system if used properly.
Which binary trading software should I use?
The short answer is all of them! Without integrating data, charts, and trade execution software into your overall trading strategy the road ahead will be full of pitfalls. Each part plays a role in allowing you to make the right decision at the right time. But, as we all learned in Econ 101, we have unlimited wants and needs but limited resources. With that in mind, how does one choose the best software to maximize return on investments.
The first thing you need to is to develop your investment strategy. Are you looking to make some extra cash? Do you live for the risk and rewards? This will guide you towards the right software for you. For example, if you love analyzing data to the smallest detail, you should make sure your data software provides you all the information you want. If you enjoy putting your feet up and making trades with the game on in the foreground, perhaps you should look into an automatic trading software. The United States Security Exchange Commission (SEC) provides a step by step guide for planning your investment strategy, which in turn will inform the software that is most important to you.
At the end of the day, you need to find a binary options platform that works for you. The best way to do that is to try the different binary options brokers out there.
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What You Need To Know About Binary Options Outside the U.S
What Do You Need To Know About Binary Options Outside the U.S?
Binary options let traders profit from price fluctuations in multiple global markets, but it’s important to understand the risks and rewards of these controversial and often-misunderstood financial instruments. Binary options bear little resemblance to traditional options, featuring different payouts, fees, and risks, as well as a unique liquidity structure and investment process.
Binary options traded outside the U.S. are also structured differently than those available on U.S. exchanges. They offer a viable alternative when speculating or hedging but only if the trader fully understands the two potential and opposing outcomes.
The Financial Industry Regulatory Authority (FINRA) summed up regulator skepticism about these exotic instruments, advising investors “to be particularly wary of non-U.S. companies that offer binary options trading platforms. These include trading applications with names that often imply an easy path to riches.”
- Binary options have a clear expiration date, time, and strike price.
- Traders profit from price fluctuations in multiple global markets using binary options, though those traded outside the U.S. are structured differently than those available on U.S. exchanges.
- Non-U.S. binary options typically have a fixed payout and risk, and are offered by individual brokers rather than directly on an exchange.
- While typical high-low binary options are the most common type of binary option, international brokers typically offer several other types of binaries as well.
Binary options outside the U.S. are an alternative for speculating or hedging but come with advantages and disadvantages. The positives include a known risk and reward, no commissions, innumerable strike prices, and expiry dates. Negatives include non-ownership of the traded asset, little regulatory oversight, and a winning payout that is usually less than the loss on losing trades.
Understanding Binary Options Outside the U.S
What Are Binary Options?
Binary options are deceptively simple to understand, making them a popular choice for low-skilled traders. The most commonly traded instrument is a high-low or fixed-return option that provides access to stocks, indices, commodities, and foreign exchange.
These options have a clearly stated expiration date, time, and strike price. If a trader wagers correctly on the market’s direction and price at the time of expiration, they are paid a fixed return regardless of how much the instrument has moved since the transaction, while an incorrect wager loses the original investment.
The binary options trader buys a call when bullish on a stock, index, commodity, or currency pair, or a put on those instruments when bearish. For a call to make money, the market must trade above the strike price at the expiration time. For a put to make money, the market must trade below the strike price at the expiration time.
The broker discloses the strike price, expiration date, payout, and risk when the trade is first established. For most high-low binary options traded outside the U.S., the strike price is the current price or rate of the underlying financial product. Therefore, the trader is wagering whether the price on the expiration date will be higher or lower than the current price.
Binary Options Outside the US
Foreign Versus U.S. Binary Options
Non-U.S. binary options typically have a fixed payout and risk and are offered by individual brokers rather than directly on an exchange. These brokers profit from the difference between what they pay out on winning trades and what they collect on losing trades. While there are exceptions, these instruments are supposed to be held until expiration in an “all-or-nothing” payout structure.
Foreign brokers are not legally allowed to solicit U.S. residents unless registered with a U.S. regulatory body such as the Securities and Exchange Commission (SEC) or Commodities Futures Trading Commission (CFTC).
The Chicago Board Options Exchange (CBOE) began listing binary options for U.S. residents in 2008. The SEC regulates the CBOE, which offers investors increased protection compared to over-the-counter markets. Chicago-based Nadex also runs a binary options exchange for U.S. residents, subject to oversight by the CFTC.
These options can be traded at any time, with the rate fluctuating between one and 100, based on the current probability of the position finishing in or out of the money. There is full transparency at all times and the trader can take the profit or loss they see on their screen prior to expiration.
They can also enter as the rate fluctuates, taking advantage of varying risk-to-reward scenarios, or hold until expiration and close the position with the maximum gain or loss documented at the time of entry. Each trade requires a willing buyer and seller because U.S. binary options trade through an exchange, which makes money through a fee that matches counter-parties.
High-Low Binary Option Example
Your analysis indicates the Standard & Poor’s 500 index will rally for the rest of the trading day and you to buy an index call option. It’s currently trading at 1,800 so you’re wagering the index’s price at expiration will be above that number. Since binary options are available for many time frames—from minutes to months away—you choose an expiration time or date that supports your analysis.
You choose an option that expires in 30 minutes, paying out 70% plus your original stake if the S&P 500 is above 1,800 at that time or you lose the entire stake if the S&P 500 is below 1,800. Minimum and maximum investments vary from broker to broker.
Say you invest $100 in the call that expires in 30 minutes. The S&P 500 price at expiration determines whether you make or lose money. The price at expiration may be the last quoted price, or the (bid + ask)/2. Each binary options broker outlines their own expiration price rules.
In this case, assume the last quote on the S&P 500 before expiration was 1,802. Therefore, you make a $70 profit (or 70% of $100) and maintain your original $100 investment. If the price finished below 1,800, you would lose your original $100 investment.
If the price expires exactly on the strike price, it is common for the trader to receive her/his money back with no profit or loss, although brokers may have different rules. The profit and/or original investment is automatically added to the trader’s account when the position is closed.
Other Types of Binary Options
The example above is for a typical high-low binary option—the most common type of binary option—outside the U.S. International brokers will typically offer several other types of binaries as well.
These include “one-touch” options, where the traded instrument needs to touch the strike price just once before expiration to make money. There is a target above and below the current price, so traders can pick which target they believe will be hit before the expiration date/time.
Meanwhile, a “range” binary option allows traders to select a price range the asset will trade within until expiration. A payout is received if price stays within the range, while the investment is lost if it exits the range.
As competition in the binary options space heats up, brokers are offering additional products that boast 50% to 500% payouts. While product structures and requirements may change, the risk and reward is always known at the trade’s outset, allowing the trader to potentially make more on a position than they lose. Of course, an option offering a 500% payout will be structured in such a way that the probability of winning the payout is very low.
Unlike their U.S. counterparts, some foreign brokers allow traders to exit positions before expiration, but most do not. Exiting a trade before expiration typically results in a lower payout (specified by broker) or small loss, but the trader won’t lose their entire investment.
The Upside and Downside
Risk and reward are known in advance, offering a major advantage. There are only two outcomes: win a fixed amount or lose a fixed amount, and there are generally no commissions or fees. They’re simple to use and there’s only one decision to make: Is the underlying asset going up or down?
In addition, there are also no liquidity concerns because the trader doesn’t own the underlying asset and brokers can offer innumerable strike prices and expiration times/dates, which is an attractive feature. The trader can also access multiple asset classes anytime a market is open somewhere in the world.
On the downside, the reward is always less than the risk when playing high-low binary options. As a result, the trader must be right a high percentage of the time to cover inevitable losses.
While payout and risk fluctuate from broker to broker and instrument to instrument, one thing remains constant: losing trades cost the trader more than they can make on winning trades. Other types of binary options may provide payouts where the reward is potentially greater than the risk but the percentage of winning trades will be lower.
What is Options Trading? 5 Things You Need to Know Before Trading Options in Singapore (2020)
With Singapore being regarded as the world’s fourth largest financial center, trading options is therefore not a rare activity.
In fact, it has become more popular in Singapore ever since after the 1990s. There are even seminars on options trading held in Singapore almost every day.
However, even with its popularity, many would still regard it as a risky endeavour. But there is no need to fret. If you are planning to trade options in Singapore but don’t know how to get a jump start with it, then you are just in the right place.
We have listed below 5 helpful things you need to know before you start trading options in Singapore.
But before anything else, let us first define what options are:
“a financial derivative that represents a contract sold by one party (the option writer) to another party (the option holder). The contract offers the buyer the right, but not the obligation, to buy (call) or sell (put) a security or other financial asset at an agreed-upon price during a certain period of time or on a specific date.”
In simple terms, an option is a contract that allows the buyer to hedge against the risk of prices movement of the underlying asset. Traders , on the other hands, use options to speculate the prices and make a profit should they being right.
Here are two more terms to help you understand options more:
Call options provide the buyer an option to buy stock at a certain price—which would make the buyer want the stock to increase. On the other hand, the option writer/trader would want the opposite to happen.
In cases where the stock does goes up, the trader is obliged—under contractual obligation—to provide the underlying shares most especially when the stock’s market price exceeds the strike.
Contrastingly to call option, put option gives the buyer the option to sell stock at a certain price. In order to gain, the buyer would want the stock to go down. Likewise, the put option writers would want the opposite.
This especially applies when the underlying market price of the stock will fall below the specified strike price on or before the specified date written in the contract.
Now that we have that covered, let us now move on to the 5 things you need to know about trading options in Singapore:
5 Things to Know Before Trading Options in Singapore
#1 Be Wary of Unregulated Online Trading Platforms
Usually, newbies fall trap into signing up for Foreign Exchange or Forex trading seminars on unregulated online trading platforms. And we can’t blame you; what with the “get rich quick” advertisements and their claims of having 100% return trading options.
However, instead of believing, you must take these as red flags.
One reason for that is how the options trading world is very dynamic. Nothing can be set to stone. Those who claim to make complete success with their returns are definitely lying. In one success out of ten trades, the other 9 failed.
Trading with unregulated online platforms puts you out of the protection of laws and regulations made by the MAS or the Monetary Authority of Singapore to safeguard investors. Continuing to do so will make you very vulnerable to scams and other difficulties such as contacting or resolving any grievances.
On the other hand, regulated financial institutions online are subject to regulations that protect investors’ money and assets. Furthermore, these institutions are required to maintain segregated customers accounts, controls, and records.
So as an investor, you are strongly encouraged to only deal with those financial institutions regulated by MAS.
#2 Be Wary of Binary Options
In line with the first point, unregulated online trading platforms offer another form of investment instrument that you must also be wary of: binary options. Binary option is a type of option that references an underlying instrument.
This instrument can be in a form of asset classes like stocks, commodities, currencies, and interest rates.
The returns of this kind of options are dependent on the instrument. If the threshold amount is exceeded, then there will be payment received. On the other hand, if the threshold is not met, then there will be no payment at all.
While it is true that binary options may provide the potential for high profits, it could also give you a significant amount of loss.
Always be skeptical when unregulated platform providers advertise binary options as “trading with zero risk”, “trading amounts of as little as $1”, and “profit payout of 500% per trade”.
These could be an indication that these platforms could be based outside Singapore which are the most unlikely to recover you any amount of money lost.
#3 Singapore Uses Warrants Instead of Listed Options for Trading
Singapore uses warrants as an options trading tool instead of listed options. It is the country’s market equivalent to the standardized equity options or standardized stock options.
Like options, warrants are contracts between the issuer and the investor that allows the investor the right but not the obligation to buy or sell the underlying stock at a fixed price during expiration.
They are securitized so that they can be traded like a stock in a derivatives exchange.
Warrants and Options also work the same way when it comes to call and put. However, they also differ in a lot of ways.
Here is a list of the main differences between structured warrants and standardized stock options, as listed by OptionTradingPedia.com:
|Contract Terms||Defined by issuer||Standardized by exchange|
|Trading||Cannot be freely shorted||Can be shorted|
|Strike Prices||Only those issued||Usually a lot more strike prices and expiration|
|Delivery||Delivered by issuer||Delivered by investors|
#4 There is Not Much Difference Between Options in Singapore and Options in US
Options listed in Singapore are not much different from those listed in the US. At the onset, an option is simply a derivative base on an underlying instrument. There is no difference.
However, the only thing that contrasts the two is the size of their markets. The US market is wider and deeper. So there is a lot of liquidity.
There are also options listed available in US stocks. This provides a wider selection of trading choices for traders.
#5 Many Option Traders in Singapore Exclusively Trade in the US
Since the rise of popularization of online platforms in trading, more and more online options trading brokers accept Singaporean accounts. As a result, options trading in the US market have become more accessible to traders in Singapore.
Singaporean could now directly conduct options trading in the US market which is more convenient to them in terms of having their money wired to and from their accounts.
The most important reason why Singaporeans do this is that the US market is the biggest and provides more liquid options in the world. Therefore, there are more trading opportunities and grants exposure to international blue chips.
Furthermore, the US Market’s standardized stock options comes with a lot more strike prices across more expiration dates.
CEO of Dr Wealth. Built a business to empower DIY investors to make better investments. A believer of the Factor-based Investing approach and runs a Multi-Factor Portfolio that taps on the Value, Size, and Profitability Factors. Conducts the flagship Intelligent Investor Immersive program under Dr Wealth. An author of Secrets of Singapore Trading Gurus and Singapore Permanent Portfolio. Featured on various media such as MoneyFM 89.3, Kiss92, Straits Times and Lianhe Zaobao. Given talks at events organised by SGX, DBS, CPF and many others.
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