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Fourth, Peretz points to the fact that binary options require less time to materialise in comparison to more traditional types of instruments. He says contracts have a predefined expiration time which usually ranges over short time spans (from minutes to several hours). “Unlike plain vanilla options, shorter time to expiry does not diminish the yield potential; shorter time to expiry contributes towards certainty for a trader who has a conviction about a specific market trend, as there is less chance for unexpected events to influence the markets,” he notes.


“Fifth, binary options are superior trading instruments in a volatile market environment since volatility often translates into big directional moves. Such moves are common with important news releases, as for example with the release of the US Non-Farm payrolls at the beginning of each month. Traders who have a strong opinion about anticipated data and its impact on the market can gain tremendously from investing in binary options since anticipated, clear movements can ensure that they collect a high yield in a very short time span.


“Another advantage of trading binary options during volatile market conditions is that they are unaffected from slippage problems that are so common during high volatility, and often cause traders’ pending orders to be missed or get filled just because of a temporary spike. Te binary options payout structure is guaranteed regardless of volatile market fluctuations,” Peretz concludes.


Features and functionality On key features and functionality


Jonathan Shkedi


“We have noticed that with our MT4 solution, traders that are in longer term positions simply like trading binaries while waiting for the outcome of their more long term positions in Meta, either for hedging their spot positions or simply for trying another method of trading.”


available with binary option platforms, Friedberg says that investors can trade FX, equities, commodities and indices. In addition, they have a choice between high/low (the most popular option wherein clients decide if the binary option will expire above or below a certain market price), touch/no touch (where the trader determines if the market will meet a pre- selected barrier) and range (where traders decide if the price of a product will fall within a certain range).


Binary options offer multi- asset trading opportunities in currencies, equities, indices and commodities with several expiries for each contract, says Peretz. “Traders choose the direction of their contract, above or below the specified baseline price, which represents the updated market price of the traded asset. Traders also have the option of deferring their position by rolling their current contract forward to a later expiry time. Tis is a valuable option if traders believe the asset price will not pass the designated threshold during the original expiry. Traders also have a Buy-Me-Out option, namely the opportunity to liquidate their trade prior to expiry. Te liquidation price is dynamically determined by the distance from the baseline price and the time left for expiry.”


Binary options trading platforms should be made available as web-based and mobile solutions, says Peretz. He believes platforms should offer fast trading execution with simple, clear interfaces that allow a trader to quickly get all the information needed for trading and risk management. Te ParagonEX binary options platform, for example, offers a simple, clear and intuitive interface. Each instrument is presented with a chart that has varying intervals. Te chart can be zoomed in for better detailed view by a click of a button. Presentation of payout structure is also clearly displayed over the chart. Once traders click the desired direction of the trade they are prompted to enter the trade amount and immediately get clear visual indication of the amount they will receive under each expiration scenario.


INSTITUTIONAL FX SERVICES - THE BROKERS HANDBOOK 2012/2013 | 53


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