I am new at this and have very little funds approximately 500 dollars. I hear you can make a fair amount of money with binary options. Does anyone know anything that I should know before taking this risk? Also are there any noteable brokers to use for binary? Also how much money can I expect to make? and lastly is binary risky and what should I know to excute successfully?
Binary options to me are not exactly the best way to make money unless you're dead certain an index will close above or below a certain strike price. Moreover, the lack of liquidity means you get some (what I believe) supbar pricing on those options. With exchange traded binaries (I'm referring to the BVZ which CBOE markets) you also get a fixed payout which means if the index blows past your strike you still only get the same capped upside amount ($100). Thinkorswim used to offer binaries but since there was a significant lack of interest they no longer support them. You could call up a few brokerage firms (interactive brokers comes to mind) who probably offer them. Unfortunately given your EXTREMELY limited capital I would argue you should hold back a bit and learn some more about options. Plus no brokerage firm is interested in you if you bring a whopping $500. Multiply that amount by 10 if you even want to get started in options trading. With that capital size your best bet is to have some tight stops and learn about FX trading.
Yes it's definitely a good idea to be aware of the risks involved in binary options trading. It is important to note that they are all or nothing propositions - basically you either win or lose. There is some useful information on the link below. In answer to your question Nadex are an example of exchange traded derivatives exchange. http://www.nadex.com/trade/binary-options.html
Don't listen to the naysayers regarding binaries. They are a great way for the undercapitalized to trade and make $$. I found trading individual stocks is far more lucrative than indexes with these guys, http://tinyurl.com/4dhs7xb Plus its instant funding and easy withdraws--- never an issue. Just don't bet your entire wad at any one time and you should win some serious cash. http://tinyurl.com/4dhs7xb these guys are fair and will actually give you 15% of your bet back should you lose! not much better than that. THere are traders making a living trading these things, lots of misinformation however on this site. take your $500, split it into 5 trades of 100 each on AAPL. This stock strongly trends, just wait for the trend to start then buy the option.you should win 3 out of 5 times.... good luck!
The two exchange traded binaries are the BVZ and BSZ. These represent the VIX and the SPX and are traded on the CBOE. I would agree with what Deltahedge posted. The markets are relatively wide and many brokerage houses don't allow you to trade them, mainly because their risk programs have problems dealing with them. Due to their limited volume, I guess they don't want to re-write their programs. That being said, I still trade these a fair amount. If you trade Iron Condors on these products these can be very good. For instance say you are going to sell the 15/16 put spread in the VIX. Currently you can get about .20 for it (both bids). If you are able to sell the BVZ 15 put binary for .20 you spend less in commission and you don't lose money unless the VIX settles below 15. With the put spread you would lose below 15.80 There are also Arb opportunities between the binaries and the spreads in the underlying indexes. For instance in the above example if you buy the 15/16 put spread in the VIX for .20 and sell the 15 BVZ put for .20 for a net of 0, you would make money between 16 and 15 and have no risk.