The concept of option trading has existed for a considerable period of time but it was previously traded as an “over-the-counter” (OTC) transaction under minimal regulatory supervision exclusively by elite investors and high net worth individuals.
The evolution of option trading can be dated back to 1971 when the Chicago Board of Trade created the first structured options trading environment by establishing the Chicago Board Options Exchange (CBOE). To date, the CBOE remains that largest global options trading platform.
In the years leading up to the US Subprime Crisis of 2008, the stock market was hitting new highs daily and this coincided with the US Securities and Exchange Commission (SEC) approved the legislation for binary options to be offered on major stock exchanges as tradable contracts, giving it recognition as a class of financial instrument on its own. In May the same year, the American Stock Exchange started offering binary options to the public and the CBOE followed suit the following month. Binary options can be catalogued as an extension of options, a highly rewarding tool tied to the financial markets that is easy to trade.
In today’s context, anyone can trade binary options using indices, commodities, listed corporations and forex as a reference point. The real appeal of binary options stem from its simplicity and the possibility of reeling in high returns in matter of an hour or even seconds.
What is Binary Option?
Option with payoff structure, with fixed amount for expires “in the money” or “out of the money”
Prediction in the direction of a stock, commodity, indices or currency movement within a designated period.
Trader never purchases assets, only predicts the market direction, up or down.
A single pip in the correct direction by expiry creates a profitable trade, and the trader receives full pay out as stated in the contract.