Binary Options Guides: OptionFire Review

Binary options trading is taking off in a big way as traders look for other ways to express their view of the market. We look closely at OptionFire in this review.

Binary options with OptionFireAlthough OptionFire is a relatively new player in the European binary options market, they are part of a larger group that is based in Australia. This means that they are suitably funded and well provided with the technology to offer a good trading experience for their customers.

They have also obtained FSA and ASIC (Australian Securities and Investments Commission) authorisation so they meet the stringent requirements of binary options trading.

OptionFire currently offer hourly traded options for a number of the major currency pairs, some of the major equities appropriate for your country, indices and commodities including Crude Oil, Gold and Silver.

What Are Hourly Options?

Hourly options have a lifetime of one hour. They expire at the turn of the hour and give you the choice of either selecting a Call, which means that you think the asset price will increase, or a Put, which allows you to express the view that price will fall.

During the hour between the start of each trading period, 2pm, for example, and the expiration of that option (3pm in our example), you can place either a Call or a Put trade and determine your investment amount which has a minimum of $50 and a maximum of $2000.

You can place your trade, or as many separate trades as you like, as long as your account can cover them, up to ten minutes before the expiration time, which is 2.50pm in our example.

If the price of the asset is above the strike price (which is the price at which you entered the trade) and you placed a Call, then you win the bet and receive your stake back plus up to 90% of your stake as a prize.

If you have lost the bet i.e. price fell below your strike price and you placed a call then you lose your stake, however up to 10% of it is returned to your account.

As this is deemed to be gambling, there is no tax to pay on winnings under UK tax law, however any loses also cannot be offset against taxable gains.

The trading interface

Placing trades with OptionFire is very simple as you select your asset and then merely click the Call or Put button at a suitable strike price.

You are kept fully informed of the time remaining until expiration time and once your trade has been placed, there is a real time update of how your trade is progressing showing if it is “in the money” (winning) or “out of the money” (losing).

There is a simple chart for each of the assets, however we recommend that traders use better charting systems to trade the hourly options effectively and safely. We will be discussing this in future articles.

Once the trade is complete, your account balance is updated and you can see a history of our trades under your account settings.

This is an example of the trade entry screen for Crude Oil:

OptionFire Trade Entry Screen

Click to enlarge

How Good Is Their Market Data?

When trading hourly options it is vital that the strike price is based on accurate market data.

OptionFire use a very high quality data feed from Reuters and display the live market prices down to the tick or pip, depending on the market.

We compared their live prices to a high quality IQFeed data feed and found good agreement between the two data sources, although you should realise that OptionFire use the average of the bid and ask to determine their strike price and live price information.

This is interesting for OptionFire clients as it means that you can use another charting system and high quality data feed to perform technical analysis to help you determine whether to place a Put, Call or not place a trade at all.

We intend to look at this in much more detail in future articles as it presents some interesting trading system opportunities.

A winning trade – just! Note how accurate the market price is, which is vital for this kind of trading:

Winning Trade with OptionFire

Click to enlarge

Opening An Account

OptionFire have worked hard to make using their website as simple and intuitive as possible.

It only takes a minute or so to register for a new account, with only a few personal details such as your name, date of birth and address required.

Once the account is opened you can then fund it using a variety of payment methods such as bank transfer, credit card and even PayPal.

Although all the trades are expressed as USD, there is automatic conversion of your home currency to dollars during the transfer process.

Risk Management

It is important to recognise that trading binary options involves significant risks so you should only bet money that you can afford to lose.

An important distinction between binary options and spread betting is that the options are not leveraged so you cannot lose more than your stake.

You don’t need stop loss orders to protect your position and you can manage your risk as long as you are sensible and don’t get carried away with the simplicity of placing trades.

We will be examining money and risk management strategies in more detail in future articles.

Our overall impression of OptionFire

Binary options trading is an interesting way to express your view of a range of markets.

It is day trading, of course, as each trade only lasts a maximum of one hour so if you don’t like intraday trading then this is not for you.

If short term trading is attractive and you have a system to help you determine and predict price movements, then you may well find OptionFire a good alternative to traditional spread betting.

There is currently no mobile based trading platforms so you can only bet via their website, however we know that they are currently developing their technologies to offer longer time frame trades as well as laying off and early settlement.

Overall, we like the OptionFire platform as it is so easy to use and we know that they have some exciting developments in the pipeline that will make them a strong player in this market.

2 Comments

  1. Dare FX 2nd June 2011
  2. John Williams 2nd June 2011

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