Binary Options Australia
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What are binary options?
Traditional binary options are options that pay a predetermined amount of money if they expire in the money. This distinguishes them from ordinary options, where the option holder can not know in advance how large the profit (if any) will be if the option expires in the money. Binary options are called binary since the investor either makes a profit or lose the entire stake – there is no sliding scale.
Many investors appreciate this clear identification of risk and possible reward. You know exactly what you stand to lose and exactly how much you can gain. With other types of investments, such sinking your money into real estate, the risk/reward is left open to circumstances until you finally close the position and realize your profit or your loss.
You can read more about how different types of binary works here. The website is targeted towards the UK market but all general information is valid for Australian traders as well.
How much money can I make?
The return on a binary option that expires in the money is typically between 65% and 95% depending on the risk profile. You always know before you purchase the binary option exactly how large the payout will be if it expires in the money. As always, high-risk tend goes hand in hand with the possibility of a high-yield.
Binary options are always cash-settled
Some ordinary options actually give the holder a right to buy and take possession of something, such as 100 shares in Apple Inc or a certain amount of gold. This is never the case with binary options. All binary options are cash settled, and some of them aren’t even based on something that you can take possession of. Many binary options are based on equity, a commodity or a foreign currency, but there are also those which are based on an index, or an exchange rate, or something similarly intangible. Virtually any unpredictable event can be the underlying “asset” of a binary option.
Binary options in Australia
In Australia, binary options are classified as derivatives under the Corporations Act. They are thus financial products and any entity that deals in binary options in Australia is required to hold a license from the Australian Financial Services (AFS) or be authorised by an AFS licensee.
The Australian Securities & Investments Commission (ASIC) has a professional register available online where you can check if an entity holds the required license.
Australia is one of the trailblazers when it comes to fully recognizing binary options as financial products, rather than regulate them as games of hazard, leave them to be largely unregulated or ban them. From a consumer perspective, the Australian stand is positive since it means stronger consumer protection. It is also good news for the serious and reputable binary option providers online that, thanks to the stringent Australian requirements, doesn’t have to compete with dishonest entities on the Australian binary option market.
Unlicensed entities agree to withdraw from the Australian market pending licensing
In July 2016, the Australian Securities & Investments Commission (ASIC) issued a statement where they informed the public about retail OTC derivative providers that had agreed to withdraw from the Australian market due to not having the required AFS license or authorization. At the time of writing, several of these entities are working to obtain the required license or authorisation in order to return to the Australian market in a legal and fully transparent fashion, in compliance with ASIC regulation.
Examples of binary option providers that have agreed to co-operate with ASIC and take remedial steps to refrain from providing financial services in Australia until they are fully licensed or authorized are IQ Option Limited, Rodeler Limited (owner of 24 Option, Grand Option, 24FX and Quick Option), BDB Services (owner of Banc de Binary), and Blackwell Global Investments Limited (owner of Blackwell Trader).
The entities that have expressed an interest in obtaining an Australian license or authorization are currently receiving assistance from ASIC to aid them in the process. Hopefully, we will soon be able to see several high quality binary option providers returning to the Australian market fully licensed or operating under the authorisation of an AFS licensee.
ASIC has released a number of public warnings in relation to unlicensed / unauthorized entities that have failed to respond to ASIC:s request.
“The dramatic increase in unlicensed conduct – particularly in entities offering binary options – is of real concern to ASIC,” says ASIC Commissioner Cathie Armour. “We remind investors to be wary of advertising on websites or unsolicited calls or emails by people offering these types of products, and to verify that product providers are appropriately licensed or authorised before dealing with them.”