Read this article to understand all the legal and regulatory aspects of binary options. Learn when and where this investment is safe, lawful and convenient.
Warning: Do not invest in Binary Options!
Juridical Outlook on Binary Options
Binary Options are a relatively new, online investment tool. Although officially considered a financial derivative, or in other words, a contract involving a financial asset, there are some limitations to trading with binary options, also known as digital options. This raises the question of whether they are legal or not.
The most accurate answer is that the legal status of binary trading differs from country to country, but as a general rule, any restrictions on binary options is imposed on the brokers and not the traders. As a client, you are allowed to purchase binary options from practically any country.
Regulated Binary Options Brokers
The main concern you should address when choosing the company with which you wish to invest is their regulatory status. In other words, have they obtained a license from a governmental office that regulates their financial activity and obligates them, the brokers, to follow certain demands that guarantee the integrity of your investment.
TopOption, one of the largest and most professional brokers worldwide, is the only company to offer both a Cysec license that regulates its activities in the European Union, as well as regulation given by the FCAin the United Kingdom. Besides these meaningful guarantees, TopOption also provide educational tools and investment advice, which will enhance your trading abilities and improve your chances of success, as well as a 100% bonus. That is why this binary broker is highly recommended:
Optionbit is a broker that is fully licensed by the CySEC. and other European regulation authorities (not available to USA citizens). What differentiates this company, besides the assurance its regulatory status gives you, is that only OptionBit offers you free use of the most advanced signals service tool: Algobit. This automated trading platform allows you to benefit from special opportunities that the Algobit software identifies during the trading session. Your accuracy levels soar and so does your profit:
Goptions is the leading Australian based broker and the only one to offer full regulation, risk-free trades, same-day withdrawals and a free signals service. Committed to offering the best customer service, this is an experienced company which offers free webinars with excellent financial guidance and helps you make more money.
RedWood Options is one of the largest and most respected binary options companies worldwide. This broker offers excellent one-on-one training session given by true professional financial advisers. It also offers more than 80 instructional videos, and a free webinar you can sign-up to by clicking the banner:
Two types of binary options
There are two distinct types of binary options: exchange traded, and non exchange traded. The difference is simple but important:
Non-exchange traded options are offered online by multiple brokers, and are the probable reason you are reading this article. If you are thinking about adding this investment tool to your portfolio, we will explain the judicial aspect as well as the financial convenience of buying this high-yielding derivative.
The name non exchange traded says it all: these options do not involve trading. You do not purchase an asset hoping its price will rise so that you may sell it with a profit, or worrying that its price will fall.
In fact, non exchange traded binary options do not have a price. Their value is determined by the trader who chooses what amount to invest, and that will always be the cost of the option.
Exchange traded options are a totally different derivative which is offered by important financial institutes such as the American Stock Exchange (AMEX) or the Chicago Board Options Exchange (CBOE). These options have an individual value that can vary, and are tradable. To operate with them, you need to have a more extensive knowledge about trading and finance.
Binary Options Legality
Most brokers are not regulated yet, and even among those who are, not all are dependable and trustworthy. This factor should concern you the most. The number of legit and reliable binary firms is small.
The first rule is to avoid companies who are yet to receive a regulatory license, and also, to understand what regulation process actually offers protection.
Cyprus is the only government that has created a process to regulate and legalize binary trading. What this means for you is that binary brokers that go through this licensing process, need to show at all times, that they have enough available funds to cover all the deposits traders have made. This way, your money is relatively guaranteed.
There are other countries, such as the Isle of Man or Seychelles, that offer regulation to gaming sites. Although this also protects your money, and some binary trading companies have opted for this path, you then need to deal with the consequences of investing in a company that is formally considered a gambling site.
If there are restrictions to gambling in your country or state, these type of binary brokers could create legal issues and tax evasion concerns for you.
Restrictions to binary trading
Most local restrictions to binary traders globally involve the prohibition or limitation of investing monies outside the country you live in. Certain countries limit the amount of money citizens can transfer abroad, and depositing money with a binary broker is in fact an overseas bank transfer.
Some countries have also severely restricted the companies, in order to protect customers. Since binary options trading is speculative and involves risk (and likewise, can offer large payouts), some governments prefer to block sites that do not properly inform about the nature and volatility of binary options.
In fact, Google as well, has demanded that corporations that wish to use Google Ads to promote their services post a clear warning to clients about the risks of financial loss.
So Are Binary Options Legal for you?
Nonetheless, no restrictions regarding trading have been imposed on individual citizens in most countries, for a simple reason: a law prohibiting binary options trading to individuals can’t be established unless this type of financial tool has been clearly, legally defined. It has not been.
Therefore, individuals from most countries in the world can open trading accounts and invest. Only in countries where there are severe restrictions on private financial investments in general, are online investments such as this one deemed illegal.
Statutory Risks of Investing in Binary Options
As explained, it is most probable that in your country of residence there is no restriction imposed on those who want to invest in the binary market. Any such restrictions are imposed upon the brokers, not the traders.
Knowledgeable of the limitations forced upon them, firms have migrated from England, where most were initially established, to places such as British Virgin Islands and Cyprus.
This is not done only to evade legal issues, but also in order to save tax money by moving to tax safe-havens, or to actually seek regulatory documents in countries where a regulation process has begun, such as in Cyprus.
Are Binary Options Legal? – Summary
- Binary options can create huge profits for investors willing to learn the strategies and methods needed to succeed with this investment tool
- Many binary options brokers offer an array of educational videos and online tutorials, but only a few have proper regulation
- Properly licensed binary brokers such as TopOption are supervised by financial protection laws that safeguard and guarantee your money is available to you
- Trading binary options is legal regardless of the status of the company with which a trader operates, but the risk is much higher for firms that lack supervision
- In certain regions there are further legal restrictions imposed on brokers, but not on customers
- Nonetheless, in countries were investing abroad is prohibited or limited, binary options trading can be unlawful
- This financial derivative involves substantial risk and caution is recommended. Only invest values you can afford to do without
- Give preference to regulated corporations who offer ample assistance and educational material
- Binary options can create enormous revenue if the trading mechanism is mastered. Payouts average at 75% and can be as high as 95% per trade