Update March 2016: We have sadly blacklisted StartOptions. The biggest problem is that while StartOptions pretends to be headquartered in Cyprus, the holding company behind the StartOptions brand is actually registered in a tax haven. The broker is thus not regulated and represents a threat for binary option traders. As such they are unregulated and unsafe. Do not open an account with StartOptions; if you have problems you will be on your own!
FSB: Hello, thank you for agreeing to be interviewed. I think to begin the interview, I would like you to introduce yourself. How did you start in this business?
Brendan: Hi, thank you for the opportunity presenting StartOptions. We started the company more than a year ago. The founding team members are seasoned managers from companies in the FX and derivatives domains. StartOptions is held by the SimplyBullish network which is a powerful marketplace of binary options trading brokerages creating a strong an global liquidity pool for investors. SimplyBullish is backed up by OGM Investments, a reputable Swiss Investment Banking group.
FSB: Tell us why you decided to plunge into the binary options business?
Brendan: There are many brokerages out there offering traditional trading services, and some gaming oriented companies trying to market more financial-gaming oriented products. We felt that there is a great opportunity in the market for a binary options trading platform that is very simplistic and fully web based, offering customers an ideal product for short-term speculations on the market and hedging purposes. We foresee 2010 as a tremendous year in terms of growth and pledge to offer many innovative services this year which will empower our investors.
FSB: Tell us about your platform. Has your binary options platform been developed in-house? When did you launched it and how easy is it to use in practice?
Brendan: StartOptions' technology is licensed from TradeSmarter which developed the leading binary options trading platform. The platform is tailored to our needs, offering robust and cutting-edge trading and performance to our customers. The feedback were getting from our clients is that simplicity is one of our main advantages. Trading is just a matter of choosing either a CALL or a PUT, selecting the desired amount and clicking on the TRADE button. Its as simple as that.
FSB: Where are you based? How are you regulated? Who is holding the players' money and how safe is it?
Brendan: StartOptions headquarters are based in Limassol, Cyprus. Our marketing and sales teams are located in London, UK. As binary options' trading is relatively new for EU traders, there isn't a specific EU regulation that covers this segment; we act without restraint as binary options regulation is not subject to regulation in Cyprus at the moment. We are aware of the importance of regulatory entities governing this field and we are negotiating with the appropriate bodies about that matter and we are positive that we can gain blanket regulation very soon.
FSB: In a nutshell what are binary options? Are they fixed odds financial bets / binary bets?
Brendan: Binary Options are a financial instrument based on practically any underlying instrument imaginable, although at Startoptions primarily based on the major Forex, major commodities and major US stocks. The most distinguishable aspect of binary options is that they offer only 2 outcomes: win/loss. The payout or payback amount is known in advance before the bet. Another distinguishing feature is that the expiration of these options is not only monthly but can be hourly or daily or any other timeframe.
FSB: What kind of binary options do you offer? Briefly describe the different type of binary options on offer.
Brendan: At the moment our primary vehicle are the hourly expiration Binary Options, based on the major Forex, major commodities and major US stocks.
FSB: What are the advantages of using StartOptions to trade online? For someone located in the UK what advantages do binary options have over other trading vehicles such as spread betting. How do they compare?
Brendan: The payout and payback calculation method are much more simple and straightforward than with spread betting. Anyone with literally zero trading experience can understand our offering, which is not often the case with spread-betting websites. On the other hand, compared to online brokerages, our advantage is that one can start trading immediately.
FSB: Can clients sell options back to you before the actual expiry date?
Brendan: Our binary options have a fixed expiration, with a limitation that we accept no new trades 10 minutes before expiration. This is what makes the game so simple and exciting.
FSB: To what types of investors/traders are binary options suitable? To whom do you think will binary options appeal most?
Brendan: Currently we are seeing a broad spectrum of different user profiles, from experienced technical traders focusing on short-time frames to traders that are looking for an intuitive approach to trading the markets.
FSB: What uses do binary trades have? Please explain with examples. Tell us a few strategies involving binaries.
Brendan: Binary trades offer fixed payout and fixed expiration. Certain strategies can take advantage of short term payouts that give higher returns than using standard forex trading. These include short term and long term breakouts, as well as reversals. Many of our clients use binary options as a hedging strategy for their forex trades. This is a fantastic use of binary options and the combination with forex trading literally guarantees successful trading, even for beginners. We have written and posted many examples of using binary options as hedging vehicles.
FSB: What are the risks?
Brendan: Short term trading vehicles like binary options are very risky and we emphasis the risk and rewards of using them. I'll claim that using binaries isn't riskier than trading a leveraged forex portfolio. on the contrary, I'll argue that with binaries you can know before entering the position the risk and rewards of your trading strategy which is a big advantage if you'll compare is to alternatives such as forex trading.
FSB: Could you briefly walk us through StartOptions' offering? How does the dealing platform work? Which markets do you cover?
Brendan: StartOptions offers hourly binary options on a variety of global underlying assets: Stocks, Currencies and Commodities. Very soon we are going to offer dozens of additional underlying assets as a growing demand from our customer case. Our platform is fully web-based and offer the a simplified trading approach towards binary options.
FSB: Can I open a demo account to try out your binary options risk-free?
Brendan: Yes, StartOptions offer both practice account and real account for traders. To open a demo account just fill in the application form and select the 'Practice Mode' radio button from the 'Trading Mode' menu.
FSB: Is it possible to leverage with binary options? How do the options odds range?
Brendan: One can place bets ranging from $30 - $250 dollars. Our payouts range from 60% - 75% at expiration. Payouts factor in the level of risk that one is taking.
FSB: Is it possible to set a stop-loss?
Brendan: There is no need for a stop loss since the risk exposure is known prior to making the trade. If one losses at expiration, the return is 10% of the stake.
FSB: So, I can still profit from a falling market using binary options right?
Brendan: Absolutely, trendy or volatile markets are ideal for binary options trading, whether as a hedge or a trade with the trend.
FSB: Do you offer intraday bets? What is the minimum and maximum bet lifetime?
Brendan: Yes, at the moment we are focusing on 1 hour expiration binary options.
FSB: You essentially provide instant execution on purely math based options models. How are you able to price/offer forex options with such short term 'target' time frames? Please provide us with some insight of your pricing engine. Do you use the Black Scholes/ Monte Carlo models to price bets?
Brendan: We have to factor trends and risk events into our pricing models. We find that to this end, pricing models based on historical data can very helpful, including Monte Carlo models.
FSB: Do you hedge the underlying clients' position in the market? It is my understanding that binary providers match risk off on both sides but this needs the volume which might be lacking on the more complicated options. Please comment on your hedging policy (if any).
Brendan: No, we do not risk our clients liquidity in any way. We do not use fractional reserves.
FSB: Please describe your typical client. How sophisticated do you need to be to get involved?
Brendan: Our client base is very diversified, from short-term traders, to rookies in the market that are looking to trade without the hassle. As it's just about choosing 'above' or 'below', binary options are a great fit for newcomers.
FSB: Is it realistic to start with a meager £75/£100 and aim or expect to make £50 per day?
Brendan: Absolutely, we offer up to 75% rewards on winning trades, some of our customers actually proved to us that 'trading for a living' is possible, managing to beat the market consistently. However, like any other speculative trading product we emphasize to our customers that education is the key to their evolution of becoming a successful traders.
FSB: Which are proving to be the most popular trades?
Brendan: The most popular trades are hedging strategies and short-timeframe speculations. Of course most of our clients fall somewhere between the technical and recreational traders.
FSB: A common fear amongst investors using those products is that in some cases binary options tend to be overpriced. How can clients ensure that the price of the binary options they are buying is fair?
Brendan: Although we aim to provide the most transparent pricing models possible, one must accept certain rare situations where pricing must reflect the risk associated with giving such a high level of return in such a short time frame.
FSB: My understanding is that with binaries a one penny difference in the settlement value can make a $100 difference in the value of the option. That's very different than regular options where the expiration value is either $0 or moves dollar for dollar with the underlying stock price. Please comment. What are the advantages/disadvantages of binary options compared to regular options?
Brendan: Exactly. One penny difference between a win and loss with a high payout is what makes binary options so attractive for both recreational betters and technical traders. Volume is not factored in and therefore you can make the same returns even when there is low volatility.
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