Binary Options Alternatives

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William Berg

William is an experienced investment writer with a history in forex trading software localization and IPO consultancy. He contributes as an author and fact-checker for established financial websites.

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Tobias Robinson

Tobias is a UK director and partner at Investing.co.uk. He provides commentary on the financial markets in the UK and supports the testing team with first-hand observations from over two decades of active trading.

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Some binary options traders seek new trading solutions to avoid regulatory restrictions, while others are just looking to try new brokers and investing apps. Whatever your needs, there are plenty of binary options alternatives, ranging from leveraged CFDs on forex and cryptocurrency to spread betting on stocks. In fact, the derivatives trade is so large and diverse in the UK, that in 2019, data published by the Bank of England showed the country’s average daily turnover from derivatives as $3.67 trillion, higher than the USA, Hong Kong and Japan.

This guide will list the best alternatives to binary options products, with examples and information on how each trading solution works and can be used. Read on for more details on the top binary options alternatives in 2025:

• Contracts for Difference (CFDs)
• Spread betting
• Options

CFDs

A contract for difference, or CFD, is a derivative that allows UK investors to make leveraged bets on assets’ price movements. A CFD is essentially an agreement between a broker and investor where the ‘losing’ party agrees to pay the ‘winning’ party the difference in the value of an asset between when the contract is opened and when it closes.

One of the main attractions of a CFD trade is the use of leverage, which allows clients to trade on margin and multiply their profits.

For example, AstraZeneca (AZ.L) stock is currently valued at £10 (1,000 GBX) and historical data and analysis implies it is likely to increase soon. In response, you open a non-leveraged long CFD contract. After a week, AZ.L increases in value to £12 and you close the contract for a profit of £2. With 1:5 leverage, you would have increased the trade value by five times and therefore generated a profit of £10 (minus any fees).

Of course, leverage acts in both positive and negative directions. For instance, if AZ.L had decreased to £8, you would owe £10 to your broker, rather than £2.

In 2019, the FCA introduced restrictions on the maximum leverage that licensed brokers can offer to retail investors, limiting forex pairs to a maximum of 1:30, commodities and indices to 1:10, and stocks and shares to 1:5.

Why Trade CFDs As Alternatives To Binary Options?

• Trading on margin can greatly increase the potential profit per trade.
• Investors can use stop-loss orders to reduce the risk exposure of a trade.
• There are many FCA-licensed brokers to choose from, avoiding the need for offshore or unregulated brokers.

Spread Betting

In spread betting, traders bet on the price movements of an underlying asset without actually owning it. As such, it bears some similarities to binary options, but with the advantage of being both FCA-regulated and tax-efficient in the UK. Leverage can also be used in spread betting.

A spread bet is essentially a bet on the movement of an asset’s price linked to the bid-ask spread, and as such securities with higher liquidity are more attractive as these tend to have tighter spreads.

Usually, spread bets are fee-free as brokers do not charge commission, but keep in mind that you are in a losing position when you initially open the contract. You need positive movement greater than the bid-ask spread to make a profit, or vice versa if you are short.

Why Start Spread Betting As Alternatives To Binary Options?

• Spread betting is a regulated activity in the UK and so there are several protective measures in place for retail investors. It also means that you can ensure you are trading with a reliable broker if they hold a genuine license with the FCA.
• There is no cap on the maximum profit from a single trade.
• It is possible to make good, sustained profits even with small deposits.
• Spread betting in the UK is tax-free, meaning you can keep more of your profits.

Standard Options

A standard options contract is a financial derivative that gives traders the right but not the obligation to buy an asset for a specified price at a predetermined time in the future. Unlike binary options, earnings are not fixed, so the potential returns are not known when you open the contract, but your losses will be limited to the price of the contract.

Traders can open a long position with a call option or go short with a put option. If you think, for example, that Unilever company stock (ULVR.L) currently valued at £40 will rise, you might open a call option allowing you to buy a certain number of shares at a future date for £42.50.

If on that date ULVR.L is at £45, you would have made £2.50 per share. A put option works in the opposite manner, with the trader betting the price will decrease.

Why Trade Standard Options As Alternatives To Binary Options?

• Profits are proportional to price movements, so there is potentially more upside than binary options.
• Losses are limited to the price of the contract, making options less risky than some binary options alternatives such as CFDs.

Binary Options Explained

When considering alternatives to binary options, it is important to understand how binaries work so instruments can be compared against the merits and drawbacks of the popular all-or-nothing product.

A classic binary options trade hinges on the simple question of whether the price of an asset, such as the FTSE, will go up or down by the end of a pre-defined period. The trader and binary broker will agree on a starting “strike price” and a time period, and the trader will make their prediction.

If the trader wins, they will get their stake back and earn a profit, usually displayed as a percentage of the initial bet, for example 80%. If their prediction is wrong, they will lose their stake.

The most common types of binary options products include:

• High/Low: Predict if the expiry price will be above or below a given strike price. This is the most common type of contract, and virtually all binary options brokers will at least offer this product.
• In/Out: The trader must predict whether the security’s price ends up within or outside a given range at the contract’s expiration. They are also known as ‘boundary’ or ‘range’ binary options contracts.
• Touch/No-Touch: The trader predicts whether an asset’s value will reach a certain strike price before expiry. The touch contract is different from others as it is not the price at expiry that matters; as long as the strike price is touched at least once, you will be in the money. Similarly, a trader who takes out a no-touch contract will lose as soon as the asset’s price touches the strike price.
• Ladder: A ladder binary options contract consists of a series of high/low contracts with strike prices at equal distances apart and increasing returns. For example, strike prices of £2, £2.50 and £3 with returns of 50%, 60% and 70%, respectively. If at expiry, the asset is worth more than £2 but equal to or less than £2.50 then you receive a 50% return.

High/Low Binary Options Trade On Focus Option

Note, expiration times have a significant impact on binary options strategies and trading styles. For example, turbo binary options’ expiry times can be anything from a few seconds to a couple of minutes, and demand a completely different strategy to the longer-term contracts which may last weeks or even months.

Why Seek Alternatives To Binary Options

There are several reasons why binary options alternatives should be considered, especially for UK-based traders:

• Banned In The UK: The UK’s Financial Conduct Authority has banned local brokers from offering binary options to retail clients, so traders are forced to use either unregulated and/or offshore binary brokers which carry a greater risk due to the lack of protective measures.
• Fixed Returns: Typically, the percentage profit is 70–90% of the stake but this can vary depending on the broker, expiration time and asset. This is a very respectable profit, but some other derivatives such as CFDs and options offer a much higher upside if there are drastic price movements, particularly when leverage is involved.
• High Risk: Trading binary options can quickly lead to mounting losses after just a few trades that go wrong, since this is an all-or-nothing trade. The risk element is a key reason retail traders seek out binary options alternatives.
• Difficulty Of Achieving Sustained Profits: Combining high risk with fixed profits means that it is not easy to consistently generate returns. If the average profit percentage of each binary options trade is 75% and you stake the same amount every time, more than 57% of trades must end in-the-money to at least break even. This is not accounting for any fees.
• Risk Of Scams: Because UK investors must use unlicensed or foreign brokers, there is a higher risk of scams. In 2018, Action Fraud found that over £87,000 was lost to fraudulent binary options brokers every day.
• Halal Or Haram: Some view binary options as gambling, which is not in accordance with Sharia law. While there may not be a clear fatwa (Islamic ruling) on binary options, if you are unsure then it may be best to seek alternatives to binary options trading to stay on the safe side.

Final Thoughts On Binary Options Alternatives

Whatever your reason for branching out from trading binary options, there are many alternatives you could switch to. Whichever you choose, it is imperative, particularly for beginners, that you take the time to learn how the instrument works. Most brokers offer education on the types of trading products they offer as well as a free demo account where you can practice. Once you feel comfortable, log into a live account and start implementing your strategy, whether it is day trading, swing trading or anything in between.

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