Trading Options in the UK

Trading Options in the UK

If you are resident in the UK, you may be wondering if you could at all trade options or forex? How do you trade options in the UK and what regulatory framework is there for you to do it?

Other important implications for the trader are considerations around taxation of the returns and tax exempt status from losses. Given that employing binary option strategies can be that lucrative, you want to make sure that you are getting the most of it.

We will look at some important considerations around the trading of these assets in the UK below.

What is the Regulatory Framework?

In the UK, the agency that is in charge of financial regulations is called the Financial Conduct Authority (FCA). They regulate all financial instruments such as CFDs, spread betting products and other derivatives.

They have not, however, outline any sort of regulation for Binary options. This is because they have used the definitions that these were Over-the-Counter (OTC) instruments initially that were only traded by the investment banks.

So, if Binary Options are not regulated by the FCA, then who regulates them?

There is another agency in the UK that regulates Binary options and that is the UK gambling commission. These are gambling regulations and as such it can be hard for people to get an idea of what protections are afforded to them.

It is for this reason that Binary Options have been slightly abused by unregulated brokers. They have managed to fall in between the cracks of less regulation and target UK consumers.

Is this likely to change?

Yes, the FCA has indeed asked for input from a number of industry representatives around how they should respond to it. This is an ongoing process and we hope to hear something over the coming months.

Can I trade with European Brokers?

Given that the UK is still part of the EU, they are still able to make use of the Mifid agreement. This is the rule whereby companies that are regulated in another EU country are allowed to sell their services into an EU member.

For this reason, if a broker is regulated by an agency such as in France, Germany or Cyprus then they are allowed to offer their trading platforms to those in the UK.

Do I have to Pay Tax?

When it comes to your personal income tax, any profits that you make on your account is technically taxable. Unlike with spread betting returns, options are considered an investment product and as such as taxable.

However, given that they are indeed an investment, you will also get the benefits of writing down your taxable income if it turns out that you have lost money on the Binary Options.

This also does depend to a large degree on personal tax situations so you should confirm this.

Which Brokers to Consider

When looking for UK option brokers, you first need to make sure that you have ticked the regulatory boxes. There are a few CFD brokers that are regulated by the FCA and do offer binary options for you to trade as well.

There are a range of brokers that you can use as a country that is a member of the EU. You just need to make sure that the broker is regulated in an EU member country and is not a “clone” broker.

Clone brokers are essentially scam websites that try to impersonate legitimate brokers .You can do this by confirming if the licence numbers are the same and that the domain is exactly as expected.

Once you have found a broker, you can trade at first on a demo account to get a good sense of how to use the platform and whether you will indeed have success when trading.

Most of the European option brokers will provide you with the benefit of keeping your funds in British pounds.


Trading options in the UK can indeed be a profitable exercise. Yet, you have to be aware of what the regulations are like and what brokers you can consider trading with.

You also have to take into account the tax obligations you could have as a result of profit on your numerous investments.

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