History of Binary Options

history of binary options

The Binary Options industry was formerly established in the year 2008. In that year the US Securities and Exchange Commission (SEC) officially approved binary options as a legitimate trading instrument. Since 2008 the industry has grown from being the province of rich individuals and wealthy corporations into a world-wide enterprise that everyone can participate in and make profits from global financial markets.

GLOBAL CRISIS YEARS

The year 2008 was a year of crisis for the global financial system. Headline banks, like Bear Stearns and Lehman brothers were declared bankrupt. Businesses and individuals were losing their livelihoods and homes, Global markets tumbled, with the Dow Jones Industrial Average falling 3000 points in a mere ten months. That global financial crisis led to calls for lower risk investments, and this demand combined with the insight and foresight of money experts at the Chicago Board Options Exchange (CBOE) that brought a new outlook and resolve to the regulatory authorities.
More and more people started to get interested in binary options trading at this time. Before 2008 binary options were only available on the ‘over-the-counter market’.

THE ‘OVER-THE-COUNTER MARKET’ (OTC)

This is a market that is decentralized and has no physical location or institutional abode where participants the market actually transact their business. In an (OTC) market dealers are market makers, who quote prices at which they will buy and sell assets (i.e, stocks, commodities, currencies). In an OTC market the parties to a trade can conclude their agreements on price without anybody outside the OTC being aware of it. This means an OTC market is not transparent like an exchange which is subject to extensive regulation which ensures global transparency.

REGULATORY REFORM

The binary options we trade today are much more regulated than the old OTC. Before 2008, the regulatory framework for the binary options industry was almost non-existent with no institutionalized market that was financially liquid. Investors then were only being offered fractions of larger more complex binary options contracts. That is how things were until the sub-prime mortgage market crisis and the crash of real estate values in 2007 in the US. The Options Clearing Committee (OCC), which had been developing the regulatory framework since the 1970s, proposed reforms which were aimed at elevating the binary options industry and to make it possible for assets to be traded in the chief exchanges. The OCC functions as a guarantor ensuring that the contracts it clears are fulfilled in full compliance with the obligations of the parties involved. Today the OCC has circa $100 Billion deposited capital for clearing members and handles circa 4.2 billion contracts a year. The OCC operates under jurisdiction of the Securities and Exchange Commission. The US Securities and Exchange Commission (SEC) recognized the virtues of the OCC’s recommendations officially declared binary options a legitimate financial instrument. The American Stock Exchange (AMEX) began offering binary options to the public in June 2007. The CBOE now has a yearly trading volume circa 1.4 billion contracts.

One of the things that attracted this writer to Stern Options is the concern they attach to legitimacy and security. A Stern client must provide proof of identity and address before they can start making profits. This is called ”Know Your Client” (KYC) and is a simple formality that pays respect to laws protecting against fraud, money laundering and the funding of terrorism etc. It makes me feel confident that I investing with a legitimate company and that my money is safe.

BINARY OPTIONS AND TECHNOLOGY

Information technology is the engine of progress behind the growth and success of the binary options industry. Stern Options equips its clients with an online trading platform which is the product of the most advanced developments in IT. Stern’s clients can utilize Stern Options Apps for cell-phone and other device based trading which have become an established phenomenon with the exponential development of that communications technology. Because these high tech inventions maximize flexibility of access to markets, today investors are not limited in ‘when’ and ‘where’ they can make their binary options contracts.

On Stern’s trading platform you can specify the amount of money (min. $25) you place on a contract, the assets strike price and all-importantly the contract expiration period. As well developments in hardware, binary options trading platforms today have integral software features. Stern’s platform has the most advanced trading aids and tools, including charts, graphs and trend signals which have made it simpler to do all the research investors need to do when choosing the assets they trade on. Stern Options’ online clients can execute ‘’call’’ and ‘’put’’ contracts on asset prices across a diverse spectrum of stocks, commodities and currency values. As well as this, you can invest in binary options based on the actual direction of movement for any of twenty major market indices, including the NIKKEI; FTSE; HANG SENG and DAX.

CONCLUDING COMMENT

Binary options investors  are commonly making average profits of 80% and more. The trading trading process is simple to understand and easy to do. Investors can enter this market with very little starting capital. This writer started with a mere $250. This industry is young but is already a firmly established global financial market. Current technological developments and innovations in software are bringing even greater choice, efficiency, flexibility and success with automated or ‘robot’ trading being the most exciting shape of things to come.