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What’s the Best Way to Trade Binary Options?

Question: Is there a safe way to day-trade binary options? How do you find a reputable broker?

— Robert DiNunzio, Brockton, Mass.

Answer: Using the word “safe” to describe any kind of day-trading activity is a stretch—especially for an investment vehicle as esoteric and complex as this. Without getting too technical, a binary option is an all-or-nothing bet that a stock price will hit a certain mark. Only a tiny handful of retail outfits in the U.S. currently offer a way to trade binary options, due to their complexity, lack of liquidity and low investor demand, says J.J. Kinahan, chief derivatives strategist for broker TD Ameritrade. You might find more options for trading them abroad, on a foreign broker platform, but experts recommend trading on an exchange rather than over the counter, since the exchanges guarantee the trade.


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