The History of Binary Options
It may surprise some of you to know that major financial players have used binary trading for some 45 years as an investment tool. However, the binary options market that you are most likely to be familiar with has a much shorter history.
Over time, binary options trading evolved as a less-complicated way of trading share options. Rather than risking large amounts of time and money in stocks and shares, a lot of experienced traders could see the potential in using the underlying asset as the trading tool, rather than buying into the asset itself.
Despite a relatively short timeline, understanding the concept of binary options and how their development has been affected by historical and economic events is a convenient knowledge base.
In this guide, you will learn:
- The history of binary options trading
- Why binary options are so popular
- Trading binary options in the future
How Did Binary Begin
Also known as "digital" options, binaries were around as far back as 1973 when Chicago Board of Exchange (CBOE) first offered them, but at this stage, they were only accessible to major banks, big institutions or the very rich.
Access to options trading was remained somewhat limited until 2008. Following on from the US mortgage crisis and subsequent collapse of dominant finance houses such as Bear Stearns and Lehman Brothers, the need for smaller, lower-risk investment opportunities was recognised.
Almost immediately, the US Securities and Exchange Commission reacted, and binary options were first opened up to exchange-based public trading later that same year. Trading in CFDs became immensely active amongst all kinds of traders, including many first-timers.
Regrettably, binary options have had some rather bad press over the years, particularly during 2015/16. The negative media was primarily caused by the selfish few who saw binaries as an easy way to target less-than-savvy individuals by wooing them with the promise of achieving high income. However, their popularity has not diminished as a result.
Today, binary options are an immensely popular choice for day traders.
When Binary Became Popular
As you have seen, binary options began their current rise to popularity during the late 2000s, primarily due to their potential for achieving fast, tax-free profits with minimal investment.
Retail traders are naturally drawn to both the simplicity and clarity of each transaction, i.e. before you take the option, the outcome is made clear and ongoing changes within the market having no bearing on the trading option selected.
Another reason for the growth in this particular form of trading is that binary options are available for almost any asset or commodity, meaning opportunities get spread amongst a diverse range of products including Forex, indices, cryptocurrencies and of course standard stocks/shares.
The Story Today With Binary
Today, binary options are an immensely popular choice for day traders. They available to trade on almost any mobile device, and there is no need for an in-depth understanding of the stock market, so they have great appeal to the hobby trader.
Another reason is the availability of super-fast trades lasting just 30-60 seconds, which are known colloquially as "turbos". For the more patient traders amongst you, there is always a good availability of longer options spanning weeks, or even months, but the majority of traders operate using a variety of underlying assets and expiry times to widen their horizons.
Binary options are available to trade in a number ways, but the most-traded are still basic High/Low options. For traders who enjoy a little more complexity and entertainment value, there are a variety of "Ladder" options available, which work in a similar way to an accumulator bet.
Binary Trading in The Future
As technology continues to update, especially in the mobile device areas, more and more types of trader are likely to use binary options as a complementary part of their trading strategy.
With faster internet connections, advanced trading platforms and the availability of information updated by the second, you can watch the market as it is changing and use that to your advantage.
In the future, there is likely to be another significant increase in the uptake of binary options, the availability of even more diverse underlying assets and even more complex trades.
Shelly is proud of her current position as Head of Brand for a well-known organisation that owns several brokerages in the trading sector. She’s consulted for us since 2015 and readers can benefit from her insider knowledge of how brokers work.