Binary options are possibly the least complex financial instrument out there. All you need to do as a trader is to answer yourself a simple question: Will the underlying asset be above or below a certain exchange price at a stated time in the near future.
Just like futures, forwards, swaps, and classical options, binary options are part of the group of financial derivative instruments. That means that as a trader you do not purchase the assets per se, but invest in a contract placing a bet on a specific asset.
Still, just like with direct investments, you need a broker to sign up for your options with.
Here´s a list of the best binary options brokerages in the US for US citizens. If you prefer to do your own research, check the following points when trying to figure out if an options broker suits you and your trading behavior or not.
Finding a Good Brokerage – What to Look For
Even though trading with binary options is technically really simple, it´s crucial for traders to find a transparent and legit brokerage. These are the most important criteria that you should always pay attention to:
Is the Brokerage Regulated?
In order to trade with all-or-nothing options in the US, it´s mandatory to trade on a regulated market with a regulated broker. The regulation is not only the legal prerequisite but also in your very own interest.
By regulating the brokerages, the SEC, the CFTC, and the NFA can create a safe framework for binary options trading. As there have been various cases of scams and fraud in the past, some nations have even banned binary options for retail customers.
The SEC however considers binary options very simple and fair financial derivative instruments. That´s why they can still be traded on the US market – traders should always make sure to only register with a regulated broker in order to avoid legal consequences and a higher risk.
Minimum Deposit and Fees?
In order to trade, you´ll usually be asked to put in a minimum deposit. Most brokers request 500 USD, but there are also good providers that only make you pay 250 USD to get started. Offers that seem too good to be true are usually a red flag, but there are indeed some brokers with a low mandatory minimum deposit that is perfect for young traders and beginners.
Apart from the first deposit, there are other types of costs that fall due when buying binary options with a broker. Per contract – that means per options – traders have to pay a certain amount of money. While some brokerages request a proportional amount, others prefer a little flat rate for each trade. It strongly depends on your trading frequency and on your funds whether you should prefer the one or the other.
How High is Your Return?
You wouldn´t think about binary options trading if you weren´t looking for a lucrative investment. In order to benefit as much as possible from good decisions, you should make sure to work with a broker that can offer you a high return. Some offer a 80% return, others even a 95% return.
That means that you´ll receive 195 USD on a successful 100 USD contract – 100 USD return on investment plus 95 USD profit. The higher the promised return, the higher the lucrativeness of your trades with the binary options broker.
How Big Is the Selection of Underlying Assets?
A grand selection of stocks, cryptocurrencies, commodities, and foreign currencies on the forex market gives you the opportunity to find promising assets to bet on.
Other Factors
Before opening an account with an online broker also make sure if it offers a demo account for you to practice binary options trading without putting your funds at risk. Fast withdrawals are another factor that you should check – the highest profit isn´t worth much if you cannot withdraw it.