Is Binary Options Trading Legal in Hong Kong? – Guide for Hong Kong Traders

Being home to 70 of the world’s prominent banking giants and credible legal protocols, Hong Kong acts as a key financial hub. Considering its top-tier facilities and extravagant living standard, no wonder Hong Kong bustles with trading activities. 

In the last few years, there has been a spectacular increase in binary options trading in the region. It has become popular trading and an investment medium for traders here. Many investors from Hong Kong are eyeing binary options to maximize their profits. However, you can also witness this growth due to the appreciative tax regime, which states that traders earning profit from binary options trading in overseas markets are not required to pay tax on their gains. So, are binary options entirely legal in Hong Kong?

Let’s find all you need to know about trading binary options in Hong Kong. From legality to trading tips and from brokers to regulations, here’s everything to help you optimize your potential in the Binary Options market. 

What Are Binary Options?  

Binary options are a relatively fresh way of trading online. It is a fast and easy-to-understand financial instrument that involves trading on price fluctuations of assets in several international markets. In binary options trading, a trader is simply required to speculate on the price rise or fall of an asset. For accurate prediction, the trader receives a fixed monetary reward between 75% – 95% of the investment amount. For example, if you invest $100, so on the accurate prediction, you can gain up to $ 180. And in case of inaccurate prediction, you tend to lose your entire investment amount. Thus, it’s either a fixed return or nothing. 

Moreover, the time frames for speculations are very short, which allows you to place trades multiple times in a day. Thus, the only thing you need to do is make accurate predictions regarding price movement, and you can enhance your chances of potential earning. 

Are Binary Options Legal in Hong Kong? 

Fortunately, trading binary options in Hong Kong is legal, provided the broker you choose is not based in Hong Kong. You can trade options here through a regulated overseas broker operating in the region. 

Binary options have been legalized in Hong Kong, considering the steady rise in options trading and its lucrative profit-making potential. It has been provided the same governance level and acknowledgment as other trading activities in the country. The legalization has been done in view to protect investors against fraudulent activities and unbearable losses. 

How to Trade Binary Options in Hong Kong? 

Here is your step-by-step guide to getting started with binary options trading in Hong Kong. 

Step #1 Choose A Broker Firm

To be able to begin trading, you need to open an account with an options broker. 

The broker is the critical intermediary through which you can place trades online. Check reviews and comparisons about the broker to find the best platform to suit your needs. Also, remember to open a demo account with multiple brokers to see which platform offers you the most hassle-free experience. 

Step #2 Choose The Asset Type or Market to Trade

Binary traders have the flexibility to trade numerous markets such as stocks, commodities, indices, Forex, and cryptocurrencies. This opens up the opportunity to be able to predict the price of a multitude of assets, including stocks, currency pairs, or bitcoin, ethereum, etc. 

Step #3 Select The Trade Expiration Time

Binary trading has an expiration date/ time that you must select before placing the trade depending on the prevailing market conditions. The expiry for options can vary from 30 seconds to several months and even a year. It’s entirely up to you to decide whether you want your trades to last for seconds, minutes, hours, months. This is the time scale after which you’ll see the results of your trade. 

Step #4 Figure Out the Trade Size

Trade size that defines the size of your trade positions has a significant impact on your potential earnings. Therefore, it is important to pay careful attention to the size of the position you can engage in depending on your trade parameters. 

Since your entire investment is at risk, your trade size needs to be carefully defined. 

Step #5 Execute Trade

Depending on your stipulations whether the price of an asset will increase or decrease, select the option call/put or buy/sell. In order to analyze price fluctuations and understand the probable outcome, you can access the tools and charts available on the trading platform. Select call/buy if you expect the price of an asset to increase above the given value or put/call if you expect it to decrease in expiration time. 

Step #6 Check and Confirm the Trade

Lastly, remember to check details before confirming the trade. Make sure the information furnished is accurate, and there is no error in executing a transaction. 

Brokers and Platforms in Hong Kong 

As discussed above, there are no dedicated licensed binary brokers based in Hong Kong. Plus, no laws are restricting you from trading through offshore brokers. To help you find a reliable broker, given below is the list of top offshore binary options brokers in Hong Kong.

#1 Quotex.io

Quotex.io is one of the best-performing brokers in Hong Kong. Based in Seychelles, this platform is available to traders all over the world. It stands out for its innovative, intuitive interface and high-quality trading tools. Quotex has two account types, including a real and a demo account. Another important highlight of this broker is that it offers the highest payoff amount in the industry, which is over 95% of your investment. Apart from this, Quotex.io is laced with advanced technologies and encryption standards to ensure its users the complete peace of mind when trading. 

Pros

  • High average profitability on binary options. 
  • Minimum Deposit: $10. 
  • Low commission. 
  • Regulated by the International Financial Market Relations Regulation Centre (IFMRRC).

Cons

  • Limited trading instruments. 
  • No application for PC and iOS devices. 

#2 IQ Option

IQ Option is the next popular trading platform in Hong Kong. Falling under the regulatory jurisdiction of four prominent nations, including Malta, the US, Ireland, and Isle of Man, no doubt, IQ Options ensure to provide you the safest trading experience. It stands out for its attractive features and security standards. Moreover, the platform is accessible to traders from over 213 nations. 

The IQ Options platform is laced with an array of charts, technical indicators, and graphs to help you make accurate predictions. In addition, it lets you set alerts and notifications to keep you updated with the market developments. 

Pros 

  • Regulated by CySEC, FCA, and MiFID.
  • Minimum Deposit: $10.
  • Offers a demo account for practice. 
  • Prompt and responsive customer support. 

Cons

  • Confined to certain jurisdictions only. 
  • It can be complex for beginners. 

#3 Pocket Option

Pocket Option is a recommended platform for all levels of traders – beginners, intermediates, experienced, and professionals. This is a registered broker in Marshall Island and is accessible to traders in 95 countries. Incepted in the year 2017, this platform has garnered appreciable attention with its high-quality trading experience. It has a multitude of attractive features and tools to support seamless options trading. 

Unlike other trading platforms, Pocket Option follows a relaxed approach to providing access to a demo account. It does not require you to undergo the complete registration process; instead, you can gain real-time experience with your virtual money with just a single click. 

Pros

  • 130+ assets are available to trade. 
  • Minimum Deposit: $50. 
  • Comes with a social trading option. 
  • Regulated by FCA, MiFID, and CySEC.

Cons

  • Has only a trading account type. 
  • Supports limited funding methods. 

#4 Expert Option

Yet another well-known binary options broker that never fails to impress traders in Hong Kong. Licensed by CROFR (Financial Market Relations Regulation Center), Expert Option is a relatively new entrant in the options trading world. However, regardless of its experience, the broker has carved a niche for itself. Its platform boasts several prominent features such as multilingual support, a comprehensive education center, attractive bonuses and promotions, quick commission-free withdrawals deposits, etc.

Besides, the platform has four different account types requiring different deposit amounts. These account types are – Mini, Silver, Gold, and VIP. 

Pros

  • Min. Deposit: $10. 
  • 50+ financial assets. 
  • Demo accounts for a real-time experience. 
  • Regulated by FMRRC, MiFID VFSC, and CySEC.

Cons

  • Maximum 15 minutes’ expiry time per trade.  
  • 50x trading mandatory for bonuses. 

Deposit and Withdrawal Options in Hong Kong

When it comes to withdrawal and Deposit for binary options, international brokers in Hong Kong gladly offer you several avenues. The most common payment methods used by investors in Hong Kong are as follows:

  • Bank Wire Transfers. 
  • Debit / credit cards (Visa/ MasterCard).
  • E-wallets (Skrill/ Yandex.Money/Qiwi/WebMoney/PayPal/Neteller).
  • Cryptocurrencies (Bitcoin/Litecoin/Ripple/ Ethereum).

Regulations in Hong Kong 

The primary body responsible for regulating and governing the financial trading market in Hong Kong is the Securities and Futures Commission (SFC). The organization is tasked to protect investors as well as to strengthen the country’s foothold as an eminent financial center. Though SFC is a government body, it operates as an independent entity under the supervision of the Securities and Futures Ordinance (SFO). It provides legal cushioning to traders. 

However, the thing to note here is that SFC does not have any specific laws regarding binary options. There is no legal framework to deal with issues related to binary options trading specifically. But that doesn’t mean SFC has no role in ensuring protection to binary traders. It provides a certain extent of security by publishing updates on unregulated and unauthorized brokers operating in the region. With such warnings, the organization can also keep track of unlawful trading activities happening in the country. Likewise, if traders want to acquire information about any broker, they can verify it with SFC. You’ll get easy access to all details regarding the broker. 

Basically, any financial services provider company willing to operate out of Hong Kong must first acquire an SFC license. But just like other regulatory bodies, SFC also lacks clarity on the legal concept surrounding binary options. Hence, there is no clarity on whether to license the binary options trading in the country or not. 

Education for Hong Kong Traders 

“It’s always easier said than done.” The same applies to binary options trading in Hong Kong. Though the region provides you appreciable resources and aids to push trading activities, it does not mean there are no chances of loss-making. Just like all other financial investments, binary options are also subject to risk. However, it is comparatively lower than other financial markets. But the fact is it does have some amount of risk involved. Thus, to maximize your chances of success in this industry, you need to gain the proper education on option strategies and tips. 

So, let’s gain insight on how to get prepared for the market.  

#1 Stay Informed

When you head into options trading, you need to know about the market happenings. As an investor, you should always be acquainted with the latest news and information. Since global events shape the movements in the financial market, they can have a great impact on your predictions. Therefore, you must develop the habit of reading a daily newspaper and financial magazine reading. And as soon as you learn to do this, select your preferred top 5-6 assets that you think are easy to analyze and predict. 

#2 Money Management 

Prudent money management is a must to achieve long-term success in options trading. Successful traders always plan their funds’ usage. They work on mitigating losses by strategically planning their budget and bidding amount. Likewise, every trader desiring to earn long-term benefits with options should know the art of money management. 

One should only invest the amount that they can afford to lose. An effective money management plan states that you must not stake more than 1% of your account balance in a single trade. Additionally, you must ensure to maintain the same amount of money in your account balance as an investment. 

#3 Start Investing Small

Remember always to start binary trading with a small amount. For beginners, it is advisable, to begin with, an initial deposit of $50 or less. Expand your trading activities and portfolio only when you become competent to make a profit with a small investment. Make sure to boost up your risk if you are able to trade well. Doing it another way around will put you at a great loss. Hence, ensure that you always start with a small amount and then go on maximizing funds over time. 

Lastly, learn fundamental and technical analysis. Binary options are not a game of instincts. You need to make swift and wise decisions based on several market indicators. Thus, you can start building your profits with consistent learning and analysis. 

Frequently Asked Questions 

Is Binary Options Trading Safe in Hong Kong?

In legal terms, trading binary options in Hong Kong is permitted. But the exception is that the broker should not be based in Hong Kong. You can trade options through overseas brokers. Nevertheless, for a safe trading experience, one should always go for a regulated broker company licensed and governed by a credible authority. As there are no specific laws around binary options trading in Hong Kong, you should be careful when selecting a broker. 

Do Traders in Hong Kong Need to Pay Fees and Taxes On Profits Made from Binary Options Trading? 

Regarding fees, yes, there are broker charges that you need to pay, and these are likely to vary from broker to broker. Thus, before committing to trade, make sure to check fees levied by your broker. Furthermore, regarding taxation, the Hong Kong government is very lenient. You need not pay any taxes on your profits earned from binary options trading unless trading is your sole income source. 

What Technical Indicators Are Available to Aid Binary Options Trading in Hong Kong? 

Technical indicators are crucial for your trading success. These help you with better predictions. The several indicators available or binary options include: 

  • Oscillators. 
  • Relative strength index.
  • Moving average convergence/divergence (MACD). 
  • Average true range. 
  • Stochastics. 

Conclusion

All in all, this article has provided you with a comprehensive overview of binary options trading in Hong Kong. Binary options are a lucrative investment. Presently, there are no regulations for binary options in Hong Kong. But considering the consistent rise in its popularity in the country, it is expected to bring some regulatory framework for it in the future. 

Despite everything, traders in Hong Kong still have access to numerous binary options brokers. Several regulated international brokers are offering their services in the region. Hence, when it comes to binary options trading, Hong Kong provides appreciable favorable opportunities for investors to develop their trading practices and earn high profits. 

About the author

I am an experienced Binary Options trader for more than 10 years. Mainly, I trade 60 second-trades at a very high hit rate.

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