Black Thursday: A Binary Perspective

As news continues to flow in regarding the forex side of things on the CHF crash, I would like to inform readers a little of what happened on the binary side. I took some time to analyze how the participants of the binary industry reacted to this event.

Traders

About 10 minutes before the news hit, there was a flurry of call options being bought as traders expected the SNB to defend it's currency. What truly spiked my curiosity was a minority of put option positions. Upon further investigation I found out that those who were buying put options had long positions on EURCHF, FX-side.

An excellent showcase of using binary options as a hedging tool. Though, we all know what happened in the end. Despite losing, those traders that were buying call options did not end up losing more than what they invested in their positions. A large majority of those who were interested in the CHF pairs continued trading through the period as the prospect of a negative balance is completely annulled in binaries.

Forex CHF traders did not fare well as a whole, with the hybrid binary/forex traders being somewhere in the middle depending on their Risk Management Risk Management One of the most common terms utilized by brokers, risk management refers to the practice of identifying potential risks in advance. Most commonly, this also involves the analysis of risk and the undertaking of precautionary steps to both mitigate and prevent for such risk.Such efforts are essential for brokers and venues in the finance industry, given the potential for fallout in the face of unforeseen events or crises. Given a more tightly regulated environment across nearly every asset class, One of the most common terms utilized by brokers, risk management refers to the practice of identifying potential risks in advance. Most commonly, this also involves the analysis of risk and the undertaking of precautionary steps to both mitigate and prevent for such risk.Such efforts are essential for brokers and venues in the finance industry, given the potential for fallout in the face of unforeseen events or crises. Given a more tightly regulated environment across nearly every asset class, Read this Term strategy.

Brokers

Claims that binary options are riskier than FX or akin to gambling were put to the test, and binary options passed the SNB test with flying colors. The risk, as we all know, was not limited to retail traders, it was the brokers that ended up footing the larger part of the bill due to their clients ending up with negative balances and owing money to their Liquidity Liquidity The term liquidity refers to the process, speed, and ease of which a given asset or security can be converted into cash. Notably, liquidity surmises a retention in market price, with the most liquid assets representing cash.The most liquid asset of all is cash itself.· In economics, liquidity is defined by how efficiently and quickly an asset can be converted into usable cash without materially affecting its market price. · Nothing is more liquid than cash, while other assets represent The term liquidity refers to the process, speed, and ease of which a given asset or security can be converted into cash. Notably, liquidity surmises a retention in market price, with the most liquid assets representing cash.The most liquid asset of all is cash itself.· In economics, liquidity is defined by how efficiently and quickly an asset can be converted into usable cash without materially affecting its market price. · Nothing is more liquid than cash, while other assets represent Read this Term providers.

From the binary option side, no such risks were present because, as mentioned before, it is not possible to owe your binary broker more than what you invest. Fixed-risk, fixed-profit and no credit (leverage) is why binaries shine in this situation. Should the situation have went the other way with a strong CHF appreciation, what was anticipated to happen, there would have been more risk to the broker, but with a proper binary platform that allows full control over the risk and solution, it would have been negligible.

This is why you must be prepared to deal with any situation and be able to react fast should things spiral out of control (though preventative measures are better than corrective). The best way to do this is arm yourself with technology that does not hold you back.

I was asked before, “What is riskier, binary options or Forex?” As I mentioned, it's hard to compare two different instruments in terms of risk, but in this event, we can see that FX was riskier to both brokers and their traders. There are hard lessons to be learned from the SNB decision, but where there are losses, there is also opportunity, and I am eager to see what this year brings us.