Will Brexit affect binary options?
Britain’s decision to leave the European Union has sent shockwaves throughout the world’s financial markets. The decision for Britain to exit – popularly known as ‘Brexit’ – was made in a nationwide referendum on 23 June. It was a close call, with 48% of those voting wishing to remain, while 52% called for the UK to leave the EU. Since the decision was made, the country has been thrown into political turmoil, with share prices and the value of the pound plummeting. Yet it will take at least another two years for Britain to formally leave the EU, and for Brexit to actually take effect.
Clear choices
In this climate of economic and political turmoil, binary options trading will seem an appealing prospect to many. This is because it is a form of market trading where the trader “bets” on one of two outcomes. It is this “either/or” approach that gives binary options their name. The trader stakes their money on whether a particular outcome will occur. If it does, the event is given a value of 100. If it doesn’t, the event is given a value of zero. The trader may choose to invest as little as £1, but their investment is priced between one and one hundred pounds according to the likelihood of the outcome chosen.
For example, imagine an investment of £1 on an event with a 45% chance of occurring. This will be priced at £45. If it occurs, the trader will win £100, minus the £45 price. If it doesn’t occur, they will win nothing, but will have to pay the £45 regardless. The advantages are that the trader has a clear choice between two outcomes, and knows exactly how much they stand to win or lose, well in advance.
The impact of Brexit
It is possible that Brexit could work in the binary trader’s favour. The rapid changes and uncertainty mean that there are many possibilities to trade on. By keeping a clear head and a good knowledge of current affairs, particularly financial, the binary options trader could see a healthy profit from a rapidly changing world. To take advantage of this situation of course it’s vital to have a good mastery of effective binary options strategies. These will help you to ride out the Brexit wave while still reaping the benefits of binary trading.
Long-term prospects
Binary options brokers in the UK will have to apply to the UK’s Financial Conduct Authority (FCA) for regulation, rather than EU-wide bodies such as the Cyprus Securities Exchange Commission (CySEC). This could be a lengthy and complex process. However, as mentioned above, it could take over two years for Britain to formally leave the EU, and until that point binary options brokers regulated by CySEC should still be able to operate in the UK, while beginning application for licensing to the FCA.
Binary options trading gives the trader an opportunity to increase the value of the pound in his pocket as it loses value on the international markets. In this respect, however, binary options are affected in the same manner as other forms of trading, in that sterling investments will not be worth as much as they were before the referendum result.
