Definition of Malta Binary Options In the MFSA communication, Binary Options are defined as being contracts based on the direction which the price of an underlying asset will take within a specified time frame. Different types of Binary Options There are various types of Binary Options, however, further clarity by the MFSA is still required to ascertain whether all the potential variants would be captured by the definition highlighted above.

One Touch Binary Option In the case of One Touch Binary Options, the trader has to predict whether the asset price will touch at least once the predefined price mark during the lifespan of the particular Touch option. Benefits of becoming a licensed a Malta Binary Options Brokers Regulated Binary options brokers will be subject to on-going monitoring by the MFSA, ensuring an adequate level of transparency and investor protection.

In the case of breach of any regulation, the MFSA could issue strict warnings and fines, and the broker would risk losing its licence in case of a serious violation. The constant monitoring by the financial services regulatory authority will ensure that binary options brokers maintain the requisite standards to ensure fair practice and transparent pricing. Binary options traders licensed under the MiFID regime will benefit from passporting rights under the directive, greatly reducing regulatory costs. Why Binary Options are becoming increasingly popular — advantages of Binary Options over traditional Options Binary options tend to be simpler to trade since only a sense of direction of the price movement of the underlying asset is required.

The magnitude of the price movement is irrelevant. There is a controlled risk to reward ratio, which are pre-determined when the contract is concluded, unlike traditional options where gains and losses can be limitless. One does not require large amounts of money to trade in binary options, but can invest small amounts of money at a time.

The payout amount is not proportional to the amount by which the option ends up in-the-money — the winner will receive the entire fixed payoff amount even if the Binary option settles in-the-money by just one tick.

Binary options tend to be of short duration, thus providing the trader with several flexible investment opportunities, yielding high rewards and fast returns. It is possible to trade in a wide variety of assets across multiple markets in a manner which suits the particular investor.

An investor can make money not only when prices are rising, but also when prices slope downwards. Many trade platforms can also be accessed via a mobile phone, enabling an investor to trade on the move and check options regularly and conveniently, twenty-four hours a day. Conclusion Binary options are a recent financial innovation and many investors are still reluctant to invest in binary options due to concerns about the regulatory and security issues.

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Financial Services. Related Practices. Binary options are ideal if you have a view on the expected direction of the spot movement, rather than a view on by how far it will move in that direction.

If you use European barriers, then you are speculating on the level of the spot on a specific date, in this case, the expiry date. If you win the bet, you receive a predefined amount of money. If you lose the bet, your maximum loss is the premium. The main use of a binary option is by option traders as part of their portfolio management and to hedge the risks of other exotic options.

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