When the payoff is either fixed amount or nothing at all, then this kind of financial option is generally known as Binary Option. There are so many brokers and trading platform which promotes Binary option, for example, Grand Capital. It gives privilege to the traders to binary option through its trading platform. Binary option gives profit to the traders by profit fluctuation in all the market around the globe but it is really important for the traders to know about the risk and advantage of this dubious and controversial fanatical tool. Since it is so simple to understand the market for the low-skilled trader, Binary option has gain popularity as well as controversy.
Types of Binary option
Basically there are two types of Binary Option depending on expiry date of the option. First one is a type of option, in which traders can pay in fixed amount of cash. On the other hand if option expires, the trader has to pay the value of the underlying security. Actually it is as simple as 0 or 1. Either you will have all or nil. That’s why they are known as nothing option or digital option.
Function of the Binary Option
Simply based on “yes” or “no” proposition the binary option works. For example, “in a certain time the underlying assets will have a certain price?” one traders place a bet whether it will go above the underlying assets or down. And if the traders believes that the underlying asset’s price go up then he buys a binary option and vise verbatim the online binary option industry like Grand Capital, where contract has been sold in OTC manner by brokers to the customer. At a fixed price, broker sells the binary option and some fixed percentage being offered to the customer in case of in-the-money settlement. Sometime broker reward a short of out-of-money to a losing customer.
Generally banned by regulatory body all around the world
Since this option maybe used in theoretical asset pricing, Hence regulators in many jurisdiction restricted it as they think, it is a kind of “Gambling” because they are prone to fraud in their application. Around the world many binary option platform have been exposed as fraudulent. FBI and Israeli police is also investing on binary option outlets. In other news, it has been clarified by the European Union that their regulatory system are about to restrict binary option trading because binary option trading is a high and unpredictable investment option.
So according to FBI, the binary option scammers obtain $10 billion annually worldwide. By using famous and reputed name, they increase people to buy a fake plan. In June 2017, Israel cabinet approved a ban on sale of binary option. Apart from this, Face book banned advertisement for binary option on January 30, 2018.Google and twitter also has announced the similar ban for binary option.