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Updated on: 11 August 2016

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There are basically two types of binary brokers available on the market. The first ones are classical online trading brokers where traders will be betting against the broker itself. The second ones are binary option exchanges were traders will be trading against each other.

On this page we’ll discuss the second type of financial spread betting, which is binary options exchange trading and CBOE: Chicago Board Options Exchange brokers. We’ll reveal you the differences between these two binary investing types and the advantages of the two trading modes.

Some traders believe that exchange financial betting is safer than traditional trading. However, this isn’t necessarily true. The main difference between the two trading types is the way the binary options broker is making money.

What is Binary Options Exchange Trading?

Binary options exchange investing, or as it’s also called, CBOE financial betting (Chicago Board Options Exchange) is a form of financial investing where traders will be trading against each other rather than against a broker. Consider the following example to better understand this:

– A trader believes that the value of Microsoft’s stocks will increase in 1 hour

– Another trader believes that the opposite of this is true.

Now, these traders will have the possibility to bet against each other. In order to do so, they will have to invest a certain amount of money on their bet. The trader that will make the accurate prediction will be rewarded with a prize that will be his bet amount plus his opponent’s bet amount minus a commission.

In exchange financial spread betting the broker that’s offering exchange services will charge a certain amount of commission from the bets that were placed by the traders. This is the way the trader is making money using the exchange financial investing model.

Difference between exchange trading and normal trading

In normal financial betting, traders will bet against the broker and not against each other. Every time a trader makes an accurate prediction, the money that will be paid out in the form of profits will come from the broker. Every time someone loses, the money will go to the broker.

From a technical standpoint these is really no difference between the two trading types. It’s completely irrelevant from traders’ perspective against whom they are trading at. In both situations, in case of an accurate prediction the trader will win, in case of an inaccurate prediction the trader will lose.

However, many people believe that exchange investing is better because in these cases the broker does not have an active interest in traders losing. In exchange trading, it’s completely irrelevant for the broker which trader wins and which loses because the broker already cashed in the commission when traders have purchased a contract.

In reality, it really makes no difference in case traders only register at legitimate binary options brokers. The fact that a broker is operating on a CBOE online investing model does not protect traders in case that broker is not a legitimate company.

It’s really about only trading at legal binary options brokers. This is the only condition traders should consider. If a broker is legal and is operating on a traditional financial spread betting model, then the services that broker offers are as safe as the services offered by an exchange binary options broker.

Advantages of Exchange Trading

Perhaps the only advantage of financial investing exchange trading is the fact that at such brokers traders will be able to see what the popular predictions are by other traders. This way, traders will have the possibility to choose what the majority chooses.

However, this is also the greatest disadvantage of CBOE binary betting brokers. This is because, say, 80% of all traders decide to choose to predict that the value of an asset will go up then there will not be enough traders to bet against this prediction, meaning that the bets of a large number of traders that predicted that the value of the asset will go up will be cancelled.

Online investing exchange trading only works if precisely 50% of all traders make one prediction and the other 50% makes the opposite prediction. In order to maintain this balance, financial betting exchanges usually provide only very difficult contracts in order to determine traders to reply more on luck than on skill.

This is because if traders reply more on luck, then overall the ratio of the choices made by all traders will be very close to 50%-50%. As such, in our opinion, CBOE binary betting brokers are actually inferior of normal binary options brokers.

What type of broker to choose?

We already established that the main criteria you should look at when choosing a financial service provider is to make sure that the broker is legitimate. As such, from a safety perspective it makes no difference what kind of broker you choose.

However, as explained in the paragraphs above, financial betting exchanges might be encouraged to offer difficult online investing contracts in order to determine traders to rely more on guessing rather than on skill. For this reason, we believe that traditional brokers are more advantageous than exchanges because they are free to offer very simple and easy to predict contracts.

If you are interested in registering at a legal binary options broker that offers great services then you should consider the ones that we have listed on this page. All these brokers are run by legal companies and offer top-of-the-line services.

The listed brokers have a large variation of asserts, offer very advantageous payout rates and provide multiple contract types as well. The services offered by these brokers are also available on mobile devices such as smartphones and tablets.

The brokers on this page also provide financial betting bonuses that will award you with free money you can use for investing purposes. Check out these brokers now if you want to invest in financial assets at reputable service providers.

Likewise, read our other online investing guides in order to learn how to win at binary options.

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