by Michael Chatterton

Binary Options are trading instruments that allow you to profit from price settling above or below a set strike price at a specified time

They can be used to trade Forex Pairs, Indices, Stocks and Commodities

■ A CALL is the name given to an Option that will return a profit if the price of the underlying asset settles ABOVE the strike price

■ A PUT is the opposite and so gives a return when price settles BELOW the strike price

■ - "In the Money" (ITM) - this can be a % return of up to 95% (although rare, returns are usually more like 70%)

- "Out of the Money" (OTM) - Loss of 100% of the initial stake

- "At the Money" (ATM) - Stake is returned (no loss or gain)

"EUR/USD - CALL, 1.2345,12.25pm, 75% Return, £100 Stake"

- The underlying asset is the currency pair (Forex) Euro vs US Dollar

- At 12.25 (Expiry time) if EURUSD's price is higher than 1.2345 then the Binary Option would be ITM and return £70 as well as the initially stake of £100.

- At 12.25 if price settles BELOW 1.2345 then the £100 Stake will be lost

■ Most Binary Options "brokers" are classified under Gambling legislation

■ Difficult to regulate offshore "brokers" due to differences in local legislation

■ Binary Options fall into a grey area as they are gambling instruments but based on the movements of real underlying assets such as Forex currency pairs or stocks

■ Financial Regulators warn against Binary Options because of lack of regulation

Brokers using 'Bonus Traps' where customers become unable to withdraw funds because they agreed to a bonus offer which needs a certain trade volume to be turned over before releasing

Brokers manipulating the price in the software

Implementing purposeful glitches such as 'Price is no longer available' messages

■ Brokers holding funds and not replying to withdrawal requests

■ Brokers offering 'Account Managers' who are just employed to keep you depositing money (they take a commission usually)

■ NADEX/IG Index - The only Binary Options brokers that allow trading of Binaries on an exchange (other brokers have the customer trade against them just like a bookmaker)

■ Marketsworld - Regulated in the Isle of Man under the Isle of Man GSC

www.leadingsignal.com www.binaryoptions.net