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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.”
Key Takeaways
- 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).
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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.
TR Binary Options Review
TR Binary Options
Broker | TR Binary Options |
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US Traders Accepted | |
Company Name | Melnic Group Ltd. |
Headquarters | Bulgaria |
Regulation | No |
Bonus Type | Deposit bonus |
Bonus Size | 100% |
Max Payout | 81% |
Out-of-Money Reward | 10% |
Trading Platform | SpotOption |
Early Closure | |
Deposit Options | Credit/debit cards, wire transfer, Neteller, CashU |
Deposit Currencies | US dollar, euro, Australian dollar, Great Britain pound, Russian ruble, Canadian dollar, Japanese yen, Swedish krona |
Minimum Deposit | $200 |
Minimum Trade | $10 |
Maximum Trade | $2,000 |
Online Since | 2020 |
Trading Instruments | Currencies, commodities, stocks, indices, pairs |
Number of Trading Instruments | 182 |
Binary Option Types | High/Low, Pairs, Long Term, 60 Seconds, One Touch, Ladder, FX/CFD |
Customer Support Types | Web form, email, live chat, telephone, paper mail |
Education Offered | Videos, FAQ, glossary, eBook, webinars, academy sessions |
Tools Offered | Market reviews, social trading, interest, double up, rollover, early close |
Commission | $30 fee for wire transfers after first one for the month, credit card withdrawals free. $10 minimum via credit card, $100 minimum via wire transfer. |
Languages | English |
Demo Account | Yes, upon deposit of $2,000. Time-restricted. |
When you open the TR Binary Options website, you might get a sense of déjà vu looking at the logo. This is because the “TR” is in the same font as the old TradeRush logo, and indeed, TR Binary Options is a re-branding of TradeRush. TradeRush has undergone quite a few changes, so it is well worth taking a closer look at TR Binary Options and what the site has to offer.
First things first. TR Binary Options is owned and operated by Melnic Group Ltd., based in Bulgaria. The broker is currently unregulated, but still does not accept customers from the USA. TradeRush has had a strong reputation in the binary options community for a long time now, so that same solid standing carries over to TR Binary Options.
Opening an Account on TR Binary Options
After you register on TR Binary Options, you can make a deposit to open an account. Your options are:
- Beginner Account: $200+
- Semi Educational Account: $5,000+
- Full Educational Account: $25,000+
- Semi Advanced Account: $50,000+
- Full Advanced Account: $100,000+
Account currencies offered include US dollar, euro, Australian dollar, British pound, Russian ruble, Canadian dollar, Japanese yen, and Swedish krona. You may deposit via credit or debit card, wire transfer, CashU, or Neteller.
There are bonuses offered starting at the Semi Educational Account tier. Bonuses start at 50% and range up to 100% at the top tier. You can also opt for trade insurance ranging between 25%-100%, but the total amount cannot equal more than the total amount of your deposit.
This is actually a very nice feature. Bonuses come with strings attached, and a lot of traders would prefer to skip out on them altogether. Some brokers force you to accept a bonus, but at TR Binary Options, you can opt for the trading insurance instead.
At the bottom of the accounts page, you will notice that “supervised demo accounts” are offered as well. This feature looks to be highly restricted, and appears to be contingent upon your deposit amount. You probably will not get access to an unlimited demo account; most traders look like they are stuck with 30 days or less to practice. This is better than nothing, but not really sufficient. There are other brokers that offer unlimited demo testing. With unrestricted demo testing, you can continue testing as long as necessary before you risk real money.
As to other educational features and trading tools, TR Binary Options appears to be quite generous. Even if you open a Beginner Account, you will get access to educational videos, an eBook, market reviews, webinars, and 24/7 support. You also get an account manager for the first month. As you climb up the tiers, you are given more benefits, including additional webinars, academy sessions, bonuses and trading insurance. At the highest tiers, you also can earn interest on the money in your account.
Withdrawal Rules
TR Binary Options is very reasonable when it comes to withdrawing your money. There is a minimum withdrawal threshold, but it is only $10 if you are using a credit or debit card. The threshold for a wire transfer is $100. On most other binary options sites, $100 is typical as a minimum threshold for all methods.
You don’t appear to have much to worry about in the way of fees either. TR Binary Options states that withdrawals processed via credit card are free. Wire transfers are $30 (which is the industry standard), but the first one each month is also free. So when you want to withdraw your money, you can withdraw all of it. On competing sites, you can lose quite a bit through fees.
Trading on TR Binary Options
When you trade on TR Binary Options, you will be using the popular SpotOption platform. This platform is practically ubiquitous; the vast majority of binary brokers are using it, so there is a chance you already know exactly how to use it. If not, you can easily learn your way around in minutes. You can trade on your desktop or laptop.
There are 182 financial instruments you can trade on TR Binary Options including stocks, currencies, indices, pairs, and commodities. That is a very large selection, better than you will find on most binary options websites. There are also quite a few different types of trades: High/Low, Long Term, 60 Seconds, Pairs, One Touch, Ladder, and FX/CFD. So this gives you numerous opportunities to make money using different strategies.
The minimum trade size is only $10, and the maximum is $2,000. This is a lower floor and a higher ceiling than is typical, which is great for those with larger and smaller bankrolls. By contrast, a lot of other sites will force you to start out trading $25, which would be a bit high for those making just the minimum deposit.
Various tools are offered to help you trade. You can view social trading right there on the platform, and you can also use double up, rollover and early close to control your trade exits. You also can get out-of-money refunds on losing trades ranging up to 10%.
If you need help while trading, you can contact customer service via live chat, telephone, web form or email. No one was staffing the help desk when I checked, which was discouraging, but I had good experiences with TradeRush customer service, so perhaps this was a one-off. Still, I recommend you check in with customer service and test them out for yourself. Make sure you are pleased with the service that TR Binary Options offers and feel comfortable depositing your money.
Conclusion: TR Binary Options Is Still a Good Choice for Traders
TradeRush has added and changed features over the years, and obviously now has a different look and feel. But as the newly re-branded TR Binary Options, it continues to offer a high quality service. Everything I have seen researching this site indicates that it remains a solid platform and a good choice for traders who are outside the USA.
TR Binary Options , 3.8 out of 10 based on 6 ratings
Regulated Binary Options Brokers: Complete Guide
What are Regulated Binary Options Brokers? Why Choose Regulated Binary Options Brokers? Top 3 Best Regulated Binary Options Brokers
What are Regulated Binary Options Brokers?
The chances are that if you are looking to understand what regulated binary brokers are, you probably already understand a few about binary options brokers. For the sake of those who stumbled upon this article, and have never heard about binary options trading before, here is a quick explanation.
Binary options trading is a form of online trading, where you can only lose your whole investment or profit with a predetermined margin. Conventional stocks or forex trading usually involve fluctuating values. You can never tell how much you will profit or lose until the trade is over. Binary options brokers are the enablers of this trader. They make the trading assets available for you to trade.
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Broker | Min Deposit ($) | Min Stake ($) | Max Payout (%) | |||||||||||||||||||||||||||||||||||||||
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IQ Option | 10 | 1 | 95 | 1st Choice | ||||||||||||||||||||||||||||||||||||||
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Olymp Trade | 10 | 1 | 92 | 3rd Choice |
Broker | Min Deposit ($) | Min Stake ($) | Max Payout (%) | ||||||||||||||||||||
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IQ Option | 10 | 1 | 95 | 1st Choice | |||||||||||||||||||
ExpertOption | 50 | 1 | 95 | 2nd Choice | |||||||||||||||||||
Olymp Trade | 10 | 1 | 92 | 3rd Choice |
Broker | Min Deposit ($) | Min Stake ($) | Max Payout (%) | |
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IQ Option | 10 | 1 | 95 | 1st Choice |
ExpertOption | 50 | 1 | 95 | 2nd Choice |
Olymp Trade | 10 | 1 | 92 | 3rd Choice |