All three financial products are derivatives - they let you profit from price moves in a stock, currency, commodity or other financial asset without owning the asset.
They are cheaper to buy than the assets themselves, so they offer greater potential profit. The precise return depends on the agreed terms of the option. In Europe, regulators are steadily clamping down but in most jurisdictions binary options trading remains legal either on regulated exchanges or via hundreds of unregulated, Internet-based platforms.
In Israel, binary options are banned. In China, the trade is legal and mostly unregulated, while in Japan it is legal only via a small number of regulated brokers.
Normally a trader buys an options contract from a broker or institution that gives them the right, but not the obligation, to buy or sell an underlying asset, at an agreed price at a fixed time in the future. On a regular option, the punter risks the fee they paid. They stand to win or lose the stake they paid multiplied by the price change.
That means the potential winnings or losses can substantially exceed the money they put up, and whether they win depends on the spread quoted by the company. Some spread betting companies offer deals to limit potential losses. In Australia, Japan and the United States, spread betting is illegal, although many banks and brokerages offer derivative products that emulate spread bets.
In China, spread betting is broadly illegal, although it is binary options return of spread in special administrative areas like Hong Kong and Macau. Edited by Sara Ledwith.
There are numerous strategies you can use some of which we will cover in further sections of our site so you dont have an excuse not utilize the endless possibilities at your disposal at any given moment. A strategy can account for the risks, as well as the capitalization levels needed to accomplish the maximal rate of sustainable return. Without those two components of a trading strategy, you are not trading, but gambling although that might not be completely true since some gambling activities also involve strategies, which means that statistically speaking, you may have a bigger chance of winning from gambling than from trading if you dont have a strategy. Furthermore, if you lack a strategy to keep you on a certain course, its easy to lose track of what youre doing. Its not unheard of for traders who dont employ a certain strategy to base all their trades on nothing more than hunches and intuition.