Trading hits binary options uk tax return
It tends to have an inherent value in itself which carries CGT implications. See CG for the formal definition. Binary options present individuals with the opportunity to benefit from fluctuations up or down in, for instance, the price of individual shares or the performance of indices such as stock markets or currency markets. These are derivative products; which means you do not have any ownership in the underlying asset at no point do you own the share in question, for instance.
In fact, there are only two possible outcomes once the option expires: HMRC will almost always regard this as a form of gambling: Cases that have gone before the courts help to shed light on this. A more recent case Hakki v Secretary of State for Work and Pensions  EWCA Civ concerned a professional poker player who made a living through his winnings and who was facing a child maintenance payment order from the Child Support Agency.
The Court of Appeal once again confirmed the general principle that gambling is not a trade. So even if your only source of income is from binary options profits, it seems unlikely at present that profits would be deemed liable for tax.
From the Copy Trader screen, users are presented with a number of filters in order to narrow their search. It is important not to be drawn in immediately by a huge short term profit figure.
One profitable trade may have masked 2 or 3 years of losses. Risk score is explained in detail in a separate FAQ below. Once a few candidates have been shortlisted, each can be clicked on to get a view of their past performance.
Profits are broken down per month — this gives a great overview of consistency. Regular monthly profit is, of course, desirable — but the odd negative month is not a show stopper.
Users need to determine what they are looking for in a trader. So there is no right or wrong answer in who to copy, it will be down to the individual — but the more time invested in the decision of who to copy, the more likely that a user will find the right trader. The eToro trading platform is fairly simple and intuitive, but it is worth running through how to open a trade.
Firstly, find the asset to be traded. This can be done via a personal watchlist, or a brand new search. This will open a list of popular assets.
Use the filters to find the asset of interest. Once found there are a number of way to open a position. The additional data includes the price chart, and also the feed — so traders can see what others have to say on that asset. With the trader ticket open, traders need to enter the amount they wish to invest, and then set the stop loss, leverage and take profit levels.
The eToro risk score is a measure of market exposure that eToro give to each trader. The number is between 1 and 10, where 1 is very low risk, and 10 is very high risk. The firm calculate this number via a number of measures. For example, they will consider whether the portfolio is diversified, whether the instruments and assets being traded are particularly volatile or not and most importantly, the levels of leverage and equity being used.
So for example, if a trader has their entire portfolio invested in three trades, all forex pairs including the US dollar, and all in the same direction, with the highest possible leverage — eToro will give them a high risk score.
The overnight fees will also vary. Overnight fees are not applied unless leverage has been used. So calculating an accurate fee per trade might be quite difficult, particularly if the length of time the position will be open is unknown. Generally the spread and costs will amount to 0. They also apply a fee on dormant accounts. An account is deemed dormant where it is not used for 12 months. Open positions will not be closed in order to pay this fee. Copying traders is a key feature at eToro.
It enables traders without the time or knowledge to copy the trades of successful eToro users. Here we explain how to copy traders on eToro. Firstly, find the Copy People option on the user menu on the left of the screen. This opens up the copy area. Along the top of this screen are a number of filters. Each can be set to help users identify the traders they want to copy.
Further down the page, eToro will list certain traders based on current short term performance, those getting copied the most, or those with a particular risk profile.
Figures are broken down by month, and go back for as long as the trader has been making trades. Long term, consistent profit is a good sign. Users can also see the current portfolio. This shows if the trader is active and what current positions are open and could therefore be copied straight away.
Users will then need to confirm they understand that eToro will open and close trades on their behalf once they confirm the intention to copy a trade. There is then one final step — but the most important. The final copy screen confirms the size of the investment the user wants to invest with this trader. The screen will confirm the average size of investment, based on the amount set by the user. Those copying need to know exactly how large their investments might be.
There is then a stop loss figure, where copy traders can stop copying if losses hit a certain point. There is also a tick box to indicate if the user also wants to copy the existing positions. If ticked, any open trades will be copied immediately. If not ticked, the copy process will wait for any new trades to be opened. The performance is listed, and from the settings buttons on the right, the copy position can be adjusted, or ended. All trading involves risk.
It can be accessed again at any time from the help menu. The key feature for the social trading platform however, is the copy feature. If traders do not understand a particular asset themselves, they can profit from someone who does.
This is the main draw of eToro. Many users will not actually trade themselves, they will simply invest in other traders who they believe will make profits. In order to copy a trader, users first need to search for the people they most want to know about. From here users can begin to filter down the results to find exactly the traders they want to copy. Traders can be filtered by location, the assets they invest in, their performance and their recent activity.
Results can then be filtered even further based on a whole range of values including risk, trading size and recent activity. Individual traders can then be selected for closer analysis. Message boards, monthly trading performance and the current portfolio can all be double checked. The copy screen is incredibly simple.
The user needs to enter the amount they wish to invest, and a stop loss figure. Those are the only choices the copier needs to make.
It could not be simpler to profit from established traders. Traders who are copied themselves, earn additional commission from the broker, based on the number of traders who follow them. So the setup is attractive to investors new to the markets, as they can follow market veterans. While experienced traders are also able to boost trading profits further, meaning everyone wins.
But the firm know winning players will trade more often — generating them higher income — so they want to see players making a profit. The asset choice at eToro is very good. Stocks are a clear strength. There are over companies from around the globe available to trade.
Elsewhere, there are over 30 currency pairs, including all of the major Forex currencies. There are 10 indices available and just 3 commodities — this list is likely to get expanded.
Those looking to trade crypto are well served at eToro, and it is certainly one of the best options at present. This is standard practice for CFD brokers. This reflects their own costs in maintaining the position. The larger the trade once leverage is considered the larger the fee will be. The fees represent a tiny proportion of the overall trade value, but are worth being aware of if traders are planning to leverage a long term trade.
The application itself attempts to emulate the trading look and feel of the full website. The searches are clear, and viewing areas large. The full range of assets available on the website are also there on the mobile app. The whole service is designed to make trading easier, and the mobile app compliments that aim. The payout details at eToro are not comparable to binary options brokers. Payouts will be scalable based on the leverage applied and performance of the asset.
For this reason, traders must understand the risk in each trade. The trading platform includes risk management elements such as stop losses, so that traders can control their risk. This is an important distinction from traditional binary options, where the risk is known with absolute accuracy. One down side to the eToro withdrawal process is the charges.
Rival brokers allow one free withdrawal per month or do not charge at all. This is something the brand could look to improve in our opinion. One repeated issue is disgruntled copy traders who were disappointed when the trader being copied did not perform as they previously had in terms of profit. This is not a fault of the broker themselves. Withdrawal delays can cause some disputes, but new clients ensuring they complete their verification steps, can ensure there are no further hold ups when a withdrawal is subsequently requested.
The platform is extremely reliable and problems with connections or website availability are generally an issue at the client end, rather than the eToro servers. For those looking to profit from trading, but without the skills or confidence to go it alone, the copy trader function is an excellent way to get introduced to the markets. Once a trader is more comfortable, they can begin making their own investment decisions.
For experienced traders, we feel the offering from eToro could be expanded, to allow more research and possibly advanced charting — the attraction for established traders of course, is the ability to make even more money on trades, by attracting followers.
Successful eToro traders can apply there are criteria to be met first , and receive Popular Investor status. Once accepted into the program, traders could rise up the levels. These range from Cadet to Elite Popular Investors.
Market CopyFunds, which group several assets following a predetermined trading strategy, and Top Trader CopyFunds, which group successful eToro investors together.