History of The Binary Options Market
It may surprise some of you to know that binary trading has been used as an investment tool by major financial players for some 45 years. 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 very useful 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 actually around as far back as 1973, when they were first offered by the Chicago Board of Exchange (CBOE), 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 major finance houses such as Bear Stearns and Lehman Bothers, 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. This was largely caused by the unscrupulous 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, largely due to their potential for achieving fast, tax-free profits with minimal investment.
Retail traders were naturally drawn to both the simplicity and clarity of each transaction i.e. the outcome being made clear before the option is taken and ongoing changes within the market having no bearing on the trading option selected.
Another reason for growth in this particular form of trading is that binary options are available for almost any asset or commodity, meaning opportunities can be 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 can be traded from 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 can currently be traded in several different 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 literally updated by the second, you can literally watch the market as it is changing and use that to your advantage.
Going forwards, there is likely to be another big 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. Learn more.