Binary trading options are a hot topic right now because of their rising popularity as well as the array of binary trading platforms available on the web. A binary option is one with two possible results – a trader buys an option and waits for it to expire, after which it either pays out (about an 80% profit on top of the initial investment), or the trader gets nothing. There’s a good reason for the popularity – binary options trading ranks among the easiest and most new trading methods on the market, and it requires microscopic initial investment. Since it started in 2008, binary options trading has captivated both newcomers to the stock exchange as well as more experienced traders. It’s also a bit controversial because of the all-or-nothing payouts that it offers to investors, and some traders can mess things up if they listen to bad advice or simply have no idea what they’re doing. On top of it all, the market is currently flooded with different brokers, and so it leaves new traders with a lot of risks if they don’t do their homework. At the same time, binary options are a thrilling way to dip one’s feet into the stock market, and they can also be quite rewarding if you know what you’re doing. But how did binary options trading come to be in the first place?

Binary options trading in its current form dates back to 2008 when the U.S. Securities and Exchange Commission approved this type of trading after the Options Clearing Commission had recommended the previous year that they should be made freely available for retail traders. Not long after their approval, both the American Stock Exchange and the Chicago Board of Options Exchange (CBOE) began trading in binary options. Before this, binary options trading had existed for many years but was only available to banks and other institutional traders as well as individual traders with a high net worth. The early form of binary trading was still fraught with complexities for retail traders, and only call options were available initially. Improvements to the trading platform combined with a wider array of options are what made binary trading take off, and the introduction of binary options in forex trading only contributed to its rising popularity.

Apart from binary options trading as it exists today, there have been various forms of options trading over the years that were similar if not essentially the same. Before the forex market was deregulated back in 1997, it essentially functioned the same way as binary options do today. The CBOE itself was formed back in the early 1970s as the first structured platform for options trading. For a long time options trading was not standardised, but over the years regulations would be added and eventually utilised to create a standard. As time progressed and more regulations were added, and there was more transparency, options trading became more respectable. But it still accounted for only a small amount of trades. Two other things happened in 2008 aside from the SEC’s approval that made it the watershed moment for binary options – technology now allowed for adequate online platforms for trading them, and the subprime mortgage crisis made investors look for a low-risk investment option.

Before the formation of the CBOE, various forms of options trading have existed throughout history, mostly hedged on various commodities markets. Early commodities and options trading was largely hedged on a future crop later in the season or the following one, to fund businesses. As time progressed, this was used to insulate against price fluctuations but mostly existed without regulation, and therefore investors could and often did back out on their whims. By the mid-19th century, there was a need for both bringing together investors as well as introducing regulations. The Chicago Board of Trade was set up in 1848 to help address this issue, and it introduced standardised futures trading in 1865. While this helped the market, illegal practices became rampant, and the Commodity Exchange Act was implemented in 1936 to address these issues and regulate the industry.

In the years since 2008, binary options have only continued to grow in popularity with traders. In 2009, the North American Derivatives Exchange launched binary options trading in the US, and since then the market has only grown around the world. There have been numerous warnings about fraudulent binary options since then by market regulators, and this has resulted in increased regulation of binary trading in various countries. In some cases, it has been banned as a form of gambling, while in places like the UK the increased regulations have legitimised it as a kind of investment. With the increased crackdowns on fraudulent brokers, binary options trading might have received bad press – but at the same time, this has led to a safer market for traders as well. Binary options have only grown in popularity around the world, and with the number of emerging economies, it’s likely that they will only continue to grow. After all, it’s more accessible and easier to get involved than ever before – and increased oversight gives potential traders more peace of mind.

Stock exchange refers to buying and selling of securities such as stocks or shares and bonds and other financial instruments. Stock exchange provides a central platform for buyers and sellers to conduct their transactions, but the securities must first be listed for the trade to take place. The central area helps in keeping records and keeping track of all the transactions with brokers at the centre of it all. In the stock market or the equity market, public companies issue and trade shares either through exchanges or over-the-counter markets. The Stock market is divided into two parts namely the Primary market where new shares are sold when the company offers its initial public offering. The other is the Secondary Market where subsequent trading takes place with both individual and institutional investors without involving the issuing company.

In the initial public offering, the price of the shares is set depending on the estimated worth of a particular company and also the number of shares being issued. The company only receives the money raised in the initial offering while the traders continue trading with the issued shares on the exchange market. The trading continues and investors can either get a profit or incur losses because the value of the company changes over time, making it difficult to predict whether the stocks will rise or fall shortly or in the long run. Some investors buy stocks from different sectors and keep them for a long time and then sells those whose value is perceived to rise increasing their chances of acquiring profits. Once an individual purchases shares of a particular company, they automatically have the rights to participate in making decisions on how the company should be run depending on their number of shares. Some of the major stock exchanges include the New York Stock Exchange (NYSE) and NASDAQ. A large volume of shares is traded in these exchanges making them among the most important in the world. With lots of daily volumes, these stocks attract many investors because they can sell and buy shares at any time.

Not all stocks offer dividends, but those that do, deliver annual payments regardless of the value of the stock. Many stable companies retain part of their profits to re-invest back to the business, and the rest is divided among the shareholders in proportion to their shares. With this kind of income, investors can use it to finance their trade or buy more shares.

Being a competitor to the NYSE, it has attracted big companies like Microsoft, Intel, Oracle, Cisco, and Dell. Contrary to NYSE that prefers face-to-face trading, NASDAQ uses computers and telecommunications network to trade with no particular central location or floor brokers. Brokers in NASDAQ match the buyers to sellers directly and continuously provide bids, prices, and make the market. It is an over-the-counter market, the first electronic stock market, and the second largest stock market in America and the world. Founded in 1971, it helped lower spread which is the difference between the bid and the asking price of the stock.

America has been the home of the largest stock markets followed by London and Hong Kong. Apart from NYSE and NASDAQ, some of the other large Stock exchanges are the American Stock Exchange (AMEX), the London Stock Exchange in London and the Hong Kong Stock Exchange, among others.

• The Dutch East India Company was the first company to offer shares of stock.
• Amsterdam Stock Exchange as been in existence since the 16th century. Spanish Jewish trader, Joseph De La Vega wrote the first books on stock trading, Confusions of Confusions in 1688.
• England issued its first government bonds in 1693.
• Stock shares began trading in the United States in the 1790s.
• The American stock exchange began in the 1800s under the title, the “Curb Exchange.”

The American stock exchange was officially formed in 1953. The NASDAQ became the world’s first electronic stock market trading over 2500 securities in 1971. 2007 saw the creation of the Financial industry regulatory authority (FINRa) when the NASDAQ merged with the New York stock exchange’s regulation committee.

The stock exchange doesn’t owe any shares in stocks; it works like a market where stock buyers can contact and connect with stock sellers. The stock exchange has a global reach with exchanges located worldwide such as the United States, United Kingdom, Italy, Japan, and China to Brazil. Understand that stocks become available to the current market after a company conducts an initial public offering where companies begin to sell shares to a set initial group of public shareholders which are called the ‘primary market’. After the initial public offering group has had time to work with the stock, the units can then be sold and purchased on the exchange which is a secondary market.

Supply and demand help set the price for the stocks where the flow of the stock can be reviewed as a price action; this means for example that seeing a bid price of $55 on a stock means that someone is advising the exchange that he or she is willing to purchase the stock for $55. Asking prices such as $31 on shares means someone is willing to sell their stock for that amount, this difference between bidding and asking prices is referred to as the bid-ask spread.

Exchanges such as New York’s NASDAQ act in several different roles. Like raising capital for business by providing a place for companies to raise capital to expand by selling their shares to the public, mobilizing savings to invest in economic sectors like agriculture, commerce and industry to creating investment opportunities for small investors by allowing both small and large stock investors to purchase the same types of stocks.

Without a centralised, worldwide regulatory commission, no entity provides an official index of regulated brokers. Some binary options websites and blogs offer best of lists and reviews of regulated, licensed brokers, but ASIC warns some of these are not reputable sources. The best sources are the regulatory agencies themselves. The CFTC licenses NADEX as a binary options broker in the U.S. which makes it a simple choice if you live in that country. The CFTC also provides a searchable database of financial services providers. A search of CySEC using the search term “binary options brokers” brings up a link list of recent related white papers, licensed brokers, and brokers for whom CySEC revoked licensing. The ASIC search engine breaks things down by topic, so you’ll search a different database for financial advisors than for a company name. The best strategy is to search both the name of the broker you want to learn about and the names of its leadership and any staff who contacted you. The UK Gambling Commission offers an information portal on the regulation of binary options and links to its searchable database of licensed operators.

Make getting started with binary options a fun, easy task by protecting yourself and your investment funds by using only regulated, licensed brokers. Some of the leading securities exchanges in the world regulate brokers specialising in this emerging market. Each securities exchange commission provides information on how it regulates brokers and a database of licensed brokers.