Insights On the Success of Binary Options by Oren Laurent

Success of Binary Options by Oren Laurent
Success of Binary Options by Oren Laurent

You can tell a great deal about how far a product and a brand has come just by how little you have to explain it to people. When my partners and I founded Banc De Binary several years ago binary options were not on the radar yet. Even the over-the-counter predecessor to our product was a mystery to most traders. Nowadays when I meet people and we engage in the necessary exchange of occupations, usually before I’ve even finished my introductory sentence detailing what my company offers, they’ll be nodding knowingly and will say things like: “oh, like Forex?” or “Call and Put, right?” It never ceases to amaze me how far we have come in just a few short years. From a pokey little office in New York and little more than a desire to offer something new, to four offices across the globe, over 200,000 clients, and an internationally recognised brand.

What binary options do, essentially, is strip the world of trading down to its fundaments. What is the perennial question that traders ask? When you take everything else away the underlying concern, for as long as there have been markets, has always been will this security rise or fall in value? It is only after this initial question is answered that other secondary questions such as “by how much” and “for how long”, as well as issues relating to spreads, leverage and stop losses come into play. At Banc De Binary our philosophy has always been that a trader’s proficiency relates to the first question alone, and that all other issues are just unnecessary complications that contribute to out-of-the-money trades. Our success has resulted from this simplicity. Streamlining trading has not only brought us countless new clients with little or no background in the markets (many of whom have rapidly discovered that they possess a knack for market speculation which they never would have had the opportunity to develop before binary options), but it has also won over a sizable number of experienced ex-traders and converts from other vehicles, who relish the prospect of taking advantage of their knowledge and expertise without having to take other variables into account.

And yet even though Banc De Binary has grown exponentially since 2009, and we’re currently at a place where only the most positive forecasts could have led us a few years ago, it still feels like the very beginning. This has a great deal to do with the strength of our competitors. Online Forex trading has been around a great deal longer than binary options have and its share of the market remains very impressive. Nevertheless when I’m often heard saying that I expect binary options to start rivaling other traditional online investment vehicles like Forex in the next few years it’s not quite the bold claim that many take it to be.

The reason for this is the $4 trillion figure that gets thrown around a great deal online. To set the record straight binary options are not competing with this figure. When online Forex is compared to other online trading vehicles the already formidable market share it possesses tends to be exaggerated. The foreign exchange market is certainly the largest and most liquid capital market in the world, but online Forex accounts for a relatively slim slice of this larger pie. Of the 3.98 trillion dollars traded every day on the world’s currency markets about $2.5 trillion is traded as forwards, swaps and other miscellaneous derivatives, $1.5 trillion is traded on the spot markets, and of this $1.5 trillion only 10% (or $150 billion) is accounted for by retail trades, among which you will find the online Forex trading platforms. Of course this is not to say that online Forex isn’t big business, it definitely is, it’s just not the insurmountable obstacle to alternative trading instruments that many take it to be.

In other words, yes, binary options do have a long way to go if they want to compete, but not quite as long as many people may think. Binary options are definitely the new kid on the block, they currently account for a fraction of all online trades, however the industry is growing beyond all expectations and with interest in online Forex having long-peaked, it may not be too long before binary options manage to stage a coup.

All you have to do is chart the search engine queries for binary options since 2008, when they were listed on the Chicago Board of Trade, and you will see a strong positive trend that shows no sign of abating. Last year alone there was a staggering five-fold increase in search queries for binary options. In contrast, December 2012 saw searches for Forex trading falling to their lowest level since February of 2006. It makes sense when you consider that around one third of Banc De Binary’s new customers are former Forex traders looking for a simpler alternative.

In many ways we are grateful to our stiff competition and the crowded market place in which we operate. They have kept us honest. They have driven us to pursue excellence in every facet of our business operations so as to be able to stand out from the crowd. This is why we have doggedly pursued the rocky road to full regulation, rather than just being comfortable to profit in an unregulated environment. It is why we have always promoted our business as a financial institution rather than any old dotcom company. And even though this path has meant more obstacles for us, more expenditure, and a higher bar to meet, we have relished the challenge and I’m proud to say it is finally starting to pay off. At the end of last year we were finally awarded a license from CySEC (The Cyprus Securities and Exchange Commission), the license is the first of its kind and it legitimises what we offer as a financial product. In addition to this it also legitimises the binary options industry as a whole, obliging everyone involved to now meet this higher set of standards and practices or risk being left behind.

I believe in binary trading, I have seen for myself how quickly newcomers take to it and how powerfully incisive a tool it can be in the hands of a knowledgeable trader. Some of our brokers defy all logic with their success-to-failure ratios, which makes me wonder just how much of the investment industry is geared towards seeing people fail. And even though our company markets itself as a simpler, more transparent way to trade, our clients are the first to observe that purer may be a more accurate epithet. The markets of course remain the same astoundingly complex and seemingly impenetrable convergence of interests and sentiment, all we have done is make getting into them as easy as possible, and not just into foreign exchange pairs either, but into commodities, stocks and indices as well, so that when a trader’s instincts are borne out by the market they can also capitalise on all the other assets that correlate with their initial trade. These features are what are attracting ex-Forex traders to our platforms in their droves. They recognise that our company offers tools that allow a very flexible approach to trading, with conservative as well as aggressive traders equally accommodated. There are just as many traders on our platforms opting for longer term positions as there are rapid-fire sixty second traders going in over and over again as an asset continues to dip or climb, and then jumping right back in on the reversal.

I really do think we have hit on something special here and I take my role in helping this industry grow extremely seriously. If the past decade has taught us anything, it’s that more complexity does not necessarily equate to better or safer investment opportunities, as the scandal of the derivatives bubble has shown, its effects still being felt by most of the world. I see binary options as a reaction to this unjustifiable complexity and the response we are getting from traders the world over indicates that we have managed to tap into a wider market feeling.