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Binary Forex Options - the brokers perspective


TMS Brokers is one of the leading brokers in Poland. We asked their CEO, Mariusz Potaczala for his thoughts on the use of and demand for Binary Forex Options.


Why are Binary Forex Options gaining usage amongst retail traders and investors?


T e popularity of Binary Forex Options is increasing steadily. Binary Options are attractive investor instruments, because their risk/reward profi le is known before the trade is entered into. T e investor has complete knowledge in advance of the Option’s cost and potential pay-off . T e fi xed cost and pay-off of the Option is also an attractive risk management feature for investors that may, otherwise, not be comfortable trading European-style options.


What types of trading are these capped risk derivatives typically being used for?


Binary Options are attractive speculative trading instruments for many investors that are interested in the limited risk aspects of Option purchases, but are not necessarily ready to trade other types of Options that require active risk management. Binary Options may also be used for portfolio risk hedging by some investors.


Noier states: “Adding a binary product into FX operations can contribute enormously, as having a simple trading tool available provides a solution to those FX traders that may fi nd systems


What range of currency pairs are now typically available with Binary Forex Options and what are the most popular types of strategy that traders are employing with them?


T e most common speculative trading strategies are going long or short touch or no- touch Options. Because of their simplicity, these Options have wide appeal. More complex strategies involving two or more Options (e.g. double-no- touch) may also be attractive to more sophisticated investors. Speculators like trading short- term Binary Options with high delta values. T ese match more closely the trading of spot, but with the limited risk of an option purchase.


Are Binary Forex Options likely to prove suitable for any trader seeking positions that match specifi c investment needs or will be mostly used by scalpers?


Binary Options are used by position traders rather than scalpers. T is is because transaction costs are still too high for scalping activity to be profi table. As their popularity increases, transaction costs will reduce and price competition from brokers will tighten spreads, but it is hard to say whether


too complicated or that don’t have the fi nancial knowledge. It opens up target markets and audiences, and is therefore a very good acquisition tool. Moreover, the addition of a product to an


Mariusz Potaczala


Binaries will become attractive instruments for scalpers.


How is Binary Forex Options trading likely to evolve during the course of next year and can we expect to see any specifi c regional demand for these instruments?


Retail forex is moving towards off ering more complex fi nancial solutions. Binary Options are a logical fi rst step for many retail investors in extending their trading to include Options. Over the next year, Binary Options will gain further popularity among forex traders, as they become familiar with the attractive features of Binaries. We expect that the popularity of Binaries and Options will continue to grow in Eastern Europe, as more investors are off ered the opportunity to trade them and costs reduce.


FX operation improves the user experience and their choices, so extending the trader experience, lifetime and value.” Levy agrees: “Most of all, it can activate all the demo account


INSTITUTIONAL FX SERVICES - THE BROKERS HANDBOOK 2012/2013 | 57


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