Are binary options really part of trading?
"you bet that a quote/currency/stock market/anything will rise or fall within a period of time. ... So, what is the relationship with trading ? I see no trading at all since I don't buy or sell quotes. So, if you just wander in and say ""oh, hey, look, a bunch of options, i'm going to play games and have excitement"" then that is, in fact, some sort of gambling. Indeed, most trading activities will be like that to you. On the other hand, you might be engaged in other business where those things matter. You might be doing a lot of trading elsewhere in the market, for instance, and suddenly everyone freaks out and the stock market goes crazy and you lose a ton of money. To protect yourself from losing a ton of money, you might buy a binary option based on VIX (the volatility index) going over a certain level. If you're not in a business where you're buying it to protect yourself, then you should probably only buy the options if you have reason to think it'll be profitable and worth the risk. If you don't understand the risks, skip it." "If I really understood it, you bet that a quote/currency/stock market/anything will rise or fall within a period of time.    So, what is the relationship with trading ? I see no trading at all since I don't buy or sell quotes. You are not betting as in ""betting on the outcome of an horse race"" where the money of the participants is redistributed to the winners of the bet. You are betting on the price movement of a security. To do that you have to buy/sell the option that will give you the profit or the loss. In your case, you would be buying or selling an option, which is a financial contract. That's trading. Then, since anyone should have the same technic (call when a currency rises and put when it falls)[...] How can you know what will be the future rate of exchange of currencies? It's not because the price went up for the last minutes/hours/days/months/years that it will continue like that. Because of that everyone won't have the same strategy. Also, not everyone is using currencies to speculate, there are firms with real needs that affect the market too, like importers and exporters, they will use financial products to protect themselves from Forex rates, not to make profits from them. [...] how the brokers (websites) can make money ? The broker (or bank) will either: I'm really afraid to bet because I think that they can bankrupt at any time! Are my fears correct ? There is always a probability that a company can go bankrupt. But that's can be very low probability. Brokers are usually not taking risks and are just being intermediaries in financial transactions (but sometime their computer systems have troubles.....), thanks to that, they are not likely to go bankrupt you after you buy your option. Also, they are regulated to insure that they are solid. Last thing, if you fear losing money, don't trade. If you do trade, only play with money you can afford to lose as you are likely to lose some (maybe all) money in the process." As far as I have read, yes binary option is a part of trading. I saw tutorials on many sites like investopedia.com , verifyproducts.com etc. which clearly shows that in binary options, trader has to take a yes or no position on the price of any underlying asset and the resulting payoff will be either all or nothing. Due to such characteristic, it has become the easier way for beginners to enter in financial trading market.
"You seem to have a little confusion over terminology that should be cleared up: You are calling this ""day-trading"" Day-trading is the term for performing multiple trading actions in a single day. While it appears that the COO has performed a buy and a sell on the same day, most people would consider this a 'single trade'. In reality, it seems that the COO had 'stock options' [a contract providing the option for the holder to buy stock at a specific price, at some point in the future], provided as part of his compensation package. He decided or was required to 'exercise' those options today. This means he bought the shares using his special 'option price'. It is extremely common for employees who exercise stock options, to sell all of the resulting stock immediately. This is very different from usual day-trading, which implies that he would have bought stock in the morning at a low price, and then sold it later at a high price. You are calling this 'insider trading'. That term specifically often implies some level of unethical behavior. In general, stock options offered to executive employees are strictly limited in how they can be exercised. For example, most stock option plans require employees to wait x number of years before they can exercise them. This gives the employee incentive to stay longer, and for a high-level executive with the ability to strongly impact company performance, it gives incentive to do well. Technically you are correct, this is likely considered an 'insider trade', but given that it seems to have been a stock option exercise, it does not necessarily imply that there was any special reasoning for why he did the trade today. It could simply be that today was the first day the stock option rules allowed him to exercise. As to your final question - no, these profits are the COO's, to do with as he likes." "Yes, very prohibitive. A common thing I was doing over 8 years ago was SHA1(MD5(""username"")+""password"")), in fact.   The problem with this method is that later one we wanted the users to be able to change their username, so instead we started doing something like this:  SHA256(MD5(""timestamp of account creation"")+SHA-1(""password"")+CustomSieve(""password""+""password""))  CustomSieve was a script that used every even character's ASCII binary representation to modify the string itself. Like my own hashing function that was not good enough for professional use, but unique enough that it drastically changed the final SHA-256 hash. Most people would probably say this was overkill, but I didn't want to just be sending two hex hashes into a SHA256 in case some day someone created a rainbow table specifically designed to crack hashes of hashes.  The timestamp of account creation was stored with the username in it's own table and accessing that table was logged differently and audited separately, so a hacker would have to be doing some really weird things in order to get that info." "Lol, wtf kind of question is this?    First off, there is no single ""derivatives market"".  There's listed derivatives (ETD's) and OTC.  Then you can break each of those broad markets down into forwards, futures, options (includes all exotics such as binaries, single barriers, double barriers, one touches, double no touches, knock ins, knock outs, reverse knock ins, reverse knock outs, window barriers, etc), and swaps (including swaptions).  All of these are product specific (FX, FI, Credit, Equities, Commodities, etc).... so its more appropriate to look at derivatives with respect to the market they are in rather than all derivatives across all markets.  Now to your question... your question makes absolutely no sense.  Are you wondering what the daily volume is?  Notional outstanding?  Total exposure?" "Yes, but that's not what I'm getting at.  Your story made sense up to the ""enterprising person"" part.  The notes represented obligations secured by apples (or rights to future apples).  Regardless of the secondary note trading, at the end of the day, one could approach issuer of the note, the apple farmer, and redeem (or attempt to redeem) the note for the underlying apples.  The enterprising person's notes are different.  The holder of the new notes cannot approach the priest and demand anything.  The story doesn't explain this critical transition, which is probably the most important part.  You suggest the problem in your response above when you say ""it's just no longer pegged specifically to one grower's apples.""  The new notes aren't ""pegged"" to anything.  That's a huge but unexplained shift, a shift I called a ""gap in the internal logic of this story.""  [Edit: In other words, with the apple notes, there was an option.  One could trade the apple notes with others or get apples.  With the new notes, there is no option.  You must trade the notes.  There is no underlying good or service to redeem.]" There are options on options.  Some derivative instruments assets ARE options (some ETFs), and you are able to buy shares of those ETFs OR options on those ETFs.  Secondly, options are just a contract, so you just need to write one up and find someone to buy the contract. The only thing is that the exchange won't facilitate it, so you will have liquidity issues. What you want to do is a diagonal / calendar spread. Buy the back month option, sell the front month option, this isn't a foreign concept and nobody is stopping you.  Since you have extra leverage on your LEAPS, then you just need to change the balancing of your short leg to match the amount of leverage the leaps will provide. (so instead of buying,selling 1:1, you need to buy one leap and perhaps sell 5 puts) Under what section do I declare my profits when I pay tax? You have to declare this as income from other source and pay tax as per tax brackets. I'm from India and have been trading in binary options for a while now Trading in India on binary options is illegal. If you are using Forex from India for trading, this is not allowed as per Foreign Exchange Management Act. There is a reason why most professional option traders are sellers instead of buyers. Option sellers IMO are analogous to insurance companies that come out ahead in the long run. That is not to say if you are bullish about a stock then you should not buy it. I personally would never buy an option outright and look to reduce my cost basis by selling options around it such as: I understand what you're asking for (you want to write options ON call options... essentially the second derivative of the underlying security), and I've never heard of it. That's not to say it doesn't exist (I'm sure some investment banker has cooked something like this up at some point), but if it does exist, you wouldn't be able to trade it as easily as you can a put or a LEAP. I'm also not sure you'd actually want to buy such a thing - the amount of leverage would be enormous, and you'd need a massive amount of margin/collateral.  Additionally, a small downward movement in the stock price could wipe out the entire value of your option.