Would you be surprised to find that there are regulated binary options available, and that they have been around for years? Most binary option traders seem to prefer the unregulated versions.
Unregulated binary options are very popular with traders for many reasons. In this article you will discover the difference between regulated and unregulated binary options.
As mentioned, regulated options have been around for years. They are available through the NADEX exchange which stands for North American Derivatives Exchange. Before you run, please understand that there are more types of derivatives than CDO’s and the hybrid monsters that destroyed the United States real estate market back in 2008.
NADEX specializes in Binary Options and Bull Spreads (another type of option play). While some binary option brokers have been known to pull fast ones with unregulated options, NADEX is regulated, and all the data is available to anyone. NADEX options are subject to CFTC regulatory oversight. Like unregulated options you can open your account with just a few hundred dollars, and you have the potential to make some really good gains!
Some unregulated companies have been known to change closing prices at the end of certain periods. Two traders may even have different closing prices on the same option! That is not possible with a NADEX regulated option. You won’t find any of the other games being played with prices or accounts that you sometimes see in the unregulated world either.
So, what is the downside, and why do so many traders prefer unregulated binary options? For one thing, you only have a few strike prices available for each time frame with NADEX options. Also, the time frames available are a few hours (at least 2) long. However, you can sell your NADEX option at any time (and take profit or lower your loss). They are called binary because of the fact that if you let them run until expiration, you are either going to get $100 or nothing. And, that is true no matter how much you paid for the option.
NADEX options are priced according to how far they are in or out of the money. The more in the money they are, the more they cost (up to 100 dollars). They are traded as option “contracts” and you can buy as many contracts as you want.
Strike prices on unregulated options are determined when you buy the option. Whatever the price is at the time you buy it is your strike price. You only have to choose whether it is going up or down from there. You can also put as much money as you want on it, so there is really no need to buy more than once (unless you are trying to set up a spread or some other option strategy).
As mentioned, strike prices on regulated options are predetermined before the time frame of the option even starts. You still have to determine if it is going to close above that price (a call option) or below (a put option), but the current price may be miles away from the strike price when you look at it.
So, with the unregulated versions, you have more leverage and freedom of choice. No wonder so many are flocking to them. Just be sure you have a good broker who is not pulling a fast one on you!