A Review of the Best Binary Options Stock Brokers
A Review of the Best Binary Options Stock Brokers
July 28, 2012Some of the traders I have known for a long time have recently been asking themselves what is the difference between all the new binary options brokers licensed in Cyprus, and the CFTC licensed brokers like NADEX and the CBOE. Technically speaking we are talking about completely different products or financial services offered all together.
You can’t compare a fully CFTC regulated exchange like NADEX to a Cyprus-based binary options licensee with employees based in off-shore offices with varying levels of trading and service skills.
Still, given everything that’s out there the new brokers have put together an interesting product which is extremely addictive if you are a trader looking for higher ROI on your investment. Take a look at Fidelity, Optionshouse or Etrade for example. There is no way these stock brokers will take a trade without a fee. Their whole business model is based on fees. The same is true for the popular stock brokers Scottrade and Ameritrade, its all based on the same business model.
With the newer binary options brokers its a completely different financial scheme. There are no broker fees and the whole business logic is designed differently. The new binary options work differently and how they make their money is based on deposits and trades. You don’t need a live trading tutorial to understand how it works. Let’s say a trader makes a deposit of $5,000 and places a put option on FB stock. Here’s a little trading scenario including possible ROI percentage on what happens if the contract expires in the money as well as outside the money. Meaning, if you predicted FB stock would fall below the resistance line on the expiration time what would be the possible outcome or gains, or alternatively if it falls below the resistance line what happens. Let’s say that $5,000 is on a put option for FB stock set to expire at 18:00.
By the time 17:00 has arrived, FB stock has decrease from $81 to $80.32. At the end of the day, it is trading at $79.9. In this case your decision to place a put option was correct and has now expired in the money, so you get your original investment back, meaning $5,000 plus the advertised rate of return. So if it is 75% then it comes out to $3,750. However, if the option would have expired out of the money or below the resistance line, you would have received $5,000 minus $3,750.
There are a variety of binary options stock brokers accepting US trades, and all of them offer commodities, indices, currencies, and stock. However, for regulatory reasons unclear to me US traders will only be able to invest in stock. So if you plan on investing in binary stock and are US-based, you should have no problem registering with any one of our recommended brokers (we have some of the best ones listed) and start to trade.
Some of my colleagues asked me if Fidelity, Optionshouse, and Optionsexpress offer binary options trading. I immediately told them that these are online stock options brokers that charge the normal fees. Specifically where Optionsexpress is concerned, they were recently bought by SCHW, which makes them an even more conservative and traditional type of options broker. Fidelity and Optionshouse are also large corporate financial entities that lack the hunger and flexibility the newer binary brokers have.
When taking a broad look at the leaders brokers and evaluating them before engaging in binary options trading, you have to measure or at least inquire about the following parameters:
1. The volume of trades. This is crucial because you don’t want to get stuck with a broker having a small trading volumes. This means he has less clients or new in the market. Regulated or publicly traded companies have to be transparent so usually you will find an indication of trading volumes in the quarterly stock owners trading statements.
2. The volatility levels are crucial, as this is an indicator to the amount of exposure or levels of risk the brokers are willing to take. If the broker is hungry it’s great, but if they are taking unnecessary risks you need to understand the possible outcome when it comes to your investment.
3. The open interest leaders. Open interest refers to the number of options and/or futures contracts that remain open or delivered on a given day. This is another indicator both towards risk levels as well as trading volume.
Little Giveaways:
- The better options brokers have an options news and updates section. Look for ones that give you daily news coverage and trading alerts. I have ones sent to my Ipad and Android cellular device as well.
- Some will send you alerts to your Iphone or cellphone on trades that you make (in the money or out of the money).
- Check out the asset index. The bigger the offering the more serious the broker is.
- Check out the binary options FAQ and/or glossary sections. If it is informative and comprehensive, you are dealing with a serious broker.
- Look for a financial or economic calendar. If you have some experience trading, you understand that you don’t really need this tool, but its more of an indication of how serious the broker is and if they know their business.
When you engage in binary stock trading you have to remember, just as you are evaluating the risk versus reward, so are the brokers managing their risk by calculating the levels of exposure they are taking on the spreads. As you gain experience trading binary stock options online, you must search and screen binary options strategies. If you are a penny trader interested in penny stocks, binary options may not be the trading vehicle that is best for you since it involves high risk and high rewards. A vehicle like bull spreads may be more suitable since the risk is low, but so are the gains. Just between us, if you are just starting out and looking for a low risk investment vehicle bull spreads are are one great way to start.
Another way to find the best online binary stock brokers for penny stocks is by comparing binary brokers and finding the best discount stock brokers. Be careful there are a lot of trading scams out there but here are a few tips to look for immediately when comparing brokers.
1. Decide what type of broker you are looking for. If you are interested in the old-school type of brokers that charge fees, check out Barrons, Kiplinger, Bloomberg, and/or the Wall Street Journal. All the big boys advertise there and its like McDonald’s, you always know what you’re gonna get inside. If your looking to make money trading binary options online, you have to consider the new CYSEC licensed brokers. The payouts are bigger, and so is the risk. Make sure to check out the reviews section located on the right panel before you start trading.
2. Decide how much you want to invest. Never invest more than you can afford to lose. This is valid in any situation, I have seen a lot of people lose their retirement money on the stock market and this is has very serious implications on your lifestyle.
3. What is the potential ROI? Again, when formulating a trading strategy you need to be able to match your strategy to the broker you are choosing. If you have a high risk high reward strategy, simply choose any one of our recommended brokers, open an account, deposit and start trading.
4. Read the terms and conditions! Don’t be hasty. Read the fine print and make an informed decision about where you want to invest your money. The new binary options brokers have different rules and trading terminology. The trading requirements or the number of times a trade has to be made in order to withdraw a bonus is crucial. Make sure to ask the right questions and don’t be ashamed to ask for a better deal to improve your odds.
5. What broker has the best bonus package? Ask about the bonuses and promotions and don’t be afraid to use the salami method. Meaning, tell them you are willing to deposit more but want a bigger bonus. Negotiating will get you amazing results so don’t be shy!
Now here is what the more traditional brokers like Saxobank, Barclays Stock Brokers, and Zecco offer. Zecco offers fixed prices starting at $4.95 on stock trades and $4.95 on options trades with 65 cents on each contract. Saxo charges 10% of the trade with a minimum commission depending on what country you are trading from. Barclays charges you a percentage fee of the trade as well based on volume starting at 1.75%. There are additional fees as well like phone fees. Which is a ludicrous considering the fact that I am investing through a broker that is making a commission on my investments, and is also charging me for contacting him. In fact, the opposite should be the case.
With the newer binary options brokers they are the ones that call you! And personally I think that’s the way it should be.
If you want to start trading with one of our recommended options brokers simply click Here.
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