Knowledge Base
What is the difference between regulated standardized options contracts and binary options?
Last Updated: October 6, 2020


What is the difference between regulated standardized options contracts and binary options?

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Let’s Ensure No Confusion

Standardized options contracts are those that are issued by an exchange, most notably the Chicago Board Options Exchange. Binary options are contracts that may or may not be regulated, often issued through online trading platforms located overseas.

Our Stance on Binary and Promise to Our Users

We take a strong stance against binary options trading. OptionAutomator will only provide software to help automate the financial mathematics of regulated, standardized options contracts.

Don’t Be Confused with the Overlap in Names

Despite the overlap in their names, there is a striking differences between standardized contracts issued by an exchange and binary options.

Standardized options are regulated under the rules of the Securities Act of 1933. These securities are regulated and standardized by their quantity, date of expiration, and strike or exercise price. A regulated, standardized options contract is much more liquid and has access to a clearinghouse, the Options Clearing Corporation (OCC). Contracts cleared through OCC guarantees that a matching buyer and seller exists for every contract issued.

Binary options are ‘bets’ on the outcome of a stock’s (or other pseudo financial instrument’s) movement. These wagers have two outcomes, either the price of the stock will go up or down. These schemes, operated mostly by off-shore brokers, have been closely linked to unfair trade practices and unscrupulous activities.

Trading Warning
Warning on Binary Options

Recently the FBI, through its Complex Financial Crimes Unit, has launched an investigation of binary options fraud. This investigation is in follow-up to complaints received.

Options Trading Warning

While you can rest assure that standardized options contracts on the various exchanges are not fraudulent, investing in options always involves risks, including investment risk where some or all of the money you invest may be lost. It is important that you understand these risks carefully before investing any of your money.

Key Takeaway

Key Takeaway
Avoid, as we do, binary options trading.

While not fraudulent, regulated standard options still involves risk. It is important that you understand these risks carefully before investing any of your money in binary options trading.

Key Takeaway
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