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The pros and cons of putting up your own binary options brokerage

How to Become a Binary Options Broker - Part 1

            If you are reading this series, chances are you are already trading binary options, so I won’t waste your time explaining what they are or how they work in trading. However, I will say this quickly: trading is much easier than brokering.

The Pros and cons of Binary Options Trading

            You can afford to look on binary options trading as a hobby, something you do during your day offs. That is not the case with brokering. A binary options brokerage is a real business, with real headaches, but also with the real potential for profit if you treat it seriously. Many experts will discourage you from even thinking about it because of the difficulties involved, and I would agree.

            For one thing, a start-up brokerage will involve real money, not the piddling U.S. $1,000 that you have in an offshore account that you have been playing with for months. You need at least U.S. $50,000 to even think about getting into the business. For another thing, the regulatory environment is tough in the US, the UK, and the EU, and likely to get tougher in the future.

Still there?

Okay, so let’s get started.

Getting capitalization

            In this first installment, we will be looking at how to get the money together to get started. If you have deep pockets and have no need to worry about raising the initial $50,000 you need, then move on to part 2.  Otherwise, read on.

            Raising the minimum of $50,000 to invest in your brokerage startup is a considerable sum to raise for most people, especially if you have no collateral. You can probably raise it against your house or other property, or by selling some assets.

            It is not something you can raise as a small business loan because “binary options” is a red flag for many traditional banks and financial institutions. Unless you already have a reputation for pulling off risky ventures successfully, you are unlikely to get venture capitalists on board, either. All in all, it is better to get your capital free and clear because it can go sideways pretty fast. You don’t want to get stuck with a loan to which you have to pay with high interest.

            You can try to get a bunch of people together to invest in it, but frankly, the fewer people you have to deal with, the better. Your best bet is to raise the money on your own, and get personal loans from friends and family that will not get involved with actually running the business. Some individuals like an angel investor may ask to see your business plan before they will give you money, so you should have one ready. You will probably have to explain about binary options and your plan for attracting clients. This will be the bulk of the next installment of this article. 

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