It is, of course, reassuring to know that the vast majority of Muslims have zero interest in replacing Hollywood movies with public executions as evening entertainment.

Of partial Lebanese descent, Haykel grew up in Lebanon and the United States, and when he talks through his Mephistophelian goatee, there is a hint of an unplaceable foreign accent. According to Haykel, the ranks of the Islamic State are deeply infused with religious vigor.

Koranic quotations are ubiquitous. This behavior includes a number of practices that modern Muslims tend to prefer not to acknowledge as integral to their sacred texts. The Koran specifies crucifixion as one of the only punishments permitted for enemies of Islam.

Leaders of the Islamic State have taken emulation of Muhammad as strict duty, and have revived traditions that have been dormant for hundreds of years. They conquered most of what is now Saudi Arabia, and their strict practices survive in a diluted version of Sharia there. If al-Qaeda wanted to revive slavery, it never said so.

And why would it? Silence on slavery probably reflected strategic thinking, with public sympathies in mind: when the Islamic State began enslaving people, even some of its supporters balked. Nonetheless, the caliphate has continued to embrace slavery and crucifixion without apology. A study group of Islamic State scholars had convened, on government orders, to resolve this issue. Tens of thousands of foreign Muslims are thought to have immigrated to the Islamic State.

Recruits hail from France, the United Kingdom, Belgium, Germany, Holland, Australia, Indonesia, the United States, and many other places. Many have come to fight, and many intend to die.

Peter R. Online recruitment has also widened the demographics of the jihadist community, by allowing conservative Muslim women—physically isolated in their homes—to reach out to recruiters, radicalize, and arrange passage to Syria. Through its appeals to both genders, the Islamic State hopes to build a complete society. For three years he was a televangelist on Iqraa TV in Cairo, but he left after the station objected to his frequent calls to establish a caliphate.

Now he preaches on Facebook and Twitter. Cerantonio—a big, friendly man with a bookish demeanor—told me he blanches at beheading videos. He hates seeing the violence, even though supporters of the Islamic State are required to endorse it.

He speaks out, controversially among jihadists, against suicide bombing, on the grounds that God forbids suicide; he differs from the Islamic State on a few other points as well. He has the kind of unkempt facial hair one sees on certain overgrown fans of The Lord of the Rings , and his obsession with Islamic apocalypticism felt familiar. He is stuck in Melbourne, where he is well known to the local constabulary. If Cerantonio were caught facilitating the movement of individuals to the Islamic State, he would be imprisoned.

Cerantonio grew up there in a half-Irish, half-Calabrian family. On a typical street one can find African restaurants, Vietnamese shops, and young Arabs walking around in the Salafi uniform of scraggly beard, long shirt, and trousers ending halfway down the calves. Cerantonio explained the joy he felt when Baghdadi was declared the caliph on June 29—and the sudden, magnetic attraction that Mesopotamia began to exert on him and his friends.

The last caliphate was the Ottoman empire, which reached its peak in the 16th century and then experienced a long decline, until the founder of the Republic of Turkey, Mustafa Kemal Atatürk, euthanized it in Baghdadi spoke at length of the importance of the caliphate in his Mosul sermon. He said that to revive the institution of the caliphate—which had not functioned except in name for about 1, years—was a communal obligation. Unlike bin Laden, and unlike those false caliphs of the Ottoman empire, he is Qurayshi.

The caliphate, Cerantonio told me, is not just a political entity but also a vehicle for salvation. They are neither obviously saved nor definitively condemned.

Similarly, Cerantonio said, the Muslim who acknowledges one omnipotent god and prays, but who dies without pledging himself to a valid caliph and incurring the obligations of that oath, has failed to live a fully Islamic life. I pointed out that this means the vast majority of Muslims in history, and all who passed away between and , died a death of disbelief. Cerantonio nodded gravely. This last criterion, Cerantonio said, is the hardest to fulfill, and requires that the caliph have territory in which he can enforce Islamic law.

He and others spoke quietly to those in power and told them that further delay would be sinful. They prepared a letter to various powerful members of ISIS , airing their displeasure at the failure to appoint a caliph, but were pacified by Adnani, the spokesman, who let them in on a secret—that a caliphate had already been declared, long before the public announcement.

They had their legitimate caliph, and at that point there was only one option. Jürgen Todenhöfer, a German author and former politician who visited the Islamic State in December, reported the arrival of fighters at one Turkish-border recruitment station in just two days.

His report, among others, suggests a still-steady inflow of foreigners, ready to give up everything at home for a shot at paradise in the worst place on Earth. In London, a week before my meal with Cerantonio, I met with three ex-members of a banned Islamist group called Al Muhajiroun The Emigrants : Anjem Choudary, Abu Baraa, and Abdul Muhid. They all expressed desire to emigrate to the Islamic State, as many of their colleagues already had, but the authorities had confiscated their passports.

Like Cerantonio, they regarded the caliphate as the only righteous government on Earth, though none would confess having pledged allegiance. He frequently appears on cable news, as one of the few people producers can book who will defend the Islamic State vociferously, until his mike is cut.

He has a reputation in the United Kingdom as a loathsome blowhard, but he and his disciples sincerely believe in the Islamic State and, on matters of doctrine, speak in its voice. Choudary and the others feature prominently in the Twitter feeds of Islamic State residents, and Abu Baraa maintains a YouTube channel to answer questions about Sharia. Since September, authorities have been investigating the three men on suspicion of supporting terrorism.

Because of this investigation, they had to meet me separately: communication among them would have violated the terms of their bail. But speaking with them felt like speaking with the same person wearing different masks. Choudary met me in a candy shop in the East London suburb of Ilford. He was dressed smartly, in a crisp blue tunic reaching nearly to his ankles, and sipped a Red Bull while we talked. But create a caliphate, and this law, along with a huge body of other jurisprudence, suddenly awakens.

In theory, all Muslims are obliged to immigrate to the territory where the caliph is applying these laws. On the day I met Choudary, Abu Rumaysah tweeted out a picture of himself with a Kalashnikov in one arm and his newborn son in the other.

Hashtag: GenerationKhilafah. The caliph is required to implement Sharia. Any deviation will compel those who have pledged allegiance to inform the caliph in private of his error and, in extreme cases, to excommunicate and replace him if he persists.

In return, the caliph commands obedience—and those who persist in supporting non-Muslim governments, after being duly warned and educated about their sin, are considered apostates. Abdul Muhid, 32, continued along these lines. He was dressed in mujahideen chic when I met him at a local restaurant: scruffy beard, Afghan cap, and a wallet outside of his clothes, attached with what looked like a shoulder holster.

When we sat down, he was eager to discuss welfare. The Islamic State may have medieval-style punishments for moral crimes lashes for boozing or fornication, stoning for adultery , but its social-welfare program is, at least in some aspects, progressive to a degree that would please an MSNBC pundit. Health care, he said, is free. All Muslims acknowledge that God is the only one who knows the future. But they also agree that he has offered us a peek at it, in the Koran and in narrations of the Prophet.

It is in this casting that the Islamic State is most boldly distinctive from its predecessors, and clearest in the religious nature of its mission. In broad strokes, al-Qaeda acts like an underground political movement, with worldly goals in sight at all times—the expulsion of non-Muslims from the Arabian peninsula, the abolishment of the state of Israel, the end of support for dictatorships in Muslim lands.

The Islamic State has its share of worldly concerns including, in the places it controls, collecting garbage and keeping the water running , but the End of Days is a leitmotif of its propaganda. Bin Laden rarely mentioned the apocalypse, and when he did, he seemed to presume that he would be long dead when the glorious moment of divine comeuppance finally arrived. During the last years of the U. They were anticipating, within a year, the arrival of the Mahdi—a messianic figure destined to lead the Muslims to victory before the end of the world.

For certain true believers—the kind who long for epic good-versus-evil battles—visions of apocalyptic bloodbaths fulfill a deep psychological need.

Of the Islamic State supporters I met, Musa Cerantonio, the Australian, expressed the deepest interest in the apocalypse and how the remaining days of the Islamic State—and the world—might look. Parts of that prediction are original to him, and do not yet have the status of doctrine. The Islamic State has attached great importance to the Syrian city of Dabiq, near Aleppo.

It is here, the Prophet reportedly said, that the armies of Rome will set up their camp. Now that it has taken Dabiq, the Islamic State awaits the arrival of an enemy army there, whose defeat will initiate the countdown to the apocalypse.

During fighting in Iraq in December, after mujahideen perhaps inaccurately reported having seen American soldiers in battle, Islamic State Twitter accounts erupted in spasms of pleasure, like overenthusiastic hosts or hostesses upon the arrival of the first guests at a party. The Prophetic narration that foretells the Dabiq battle refers to the enemy as Rome. But Cerantonio makes a case that Rome meant the Eastern Roman empire, which had its capital in what is now Istanbul.

We should think of Rome as the Republic of Turkey—the same republic that ended the last self-identified caliphate, 90 years ago. Other Islamic State sources suggest that Rome might mean any infidel army, and the Americans will do nicely.

After its battle in Dabiq, Cerantonio said, the caliphate will expand and sack Istanbul. Some believe it will then cover the entire Earth, but Cerantonio suggested its tide may never reach beyond the Bosporus. Just as Dajjal prepares to finish them off, Jesus—the second-most-revered prophet in Islam—will return to Earth, spear Dajjal, and lead the Muslims to victory. But he is hopeful. The Islamic State has its best and worst days ahead of it. Osama bin Laden was seldom predictable.

He ended his first television interview cryptically. In London, Choudary and his students provided detailed descriptions of how the Islamic State must conduct its foreign policy, now that it is a caliphate. But the waging of war to expand the caliphate is an essential duty of the caliph. Choudary took pains to present the laws of war under which the Islamic State operates as policies of mercy rather than of brutality.

He told me the state has an obligation to terrorize its enemies—a holy order to scare the shit out of them with beheadings and crucifixions and enslavement of women and children, because doing so hastens victory and avoids prolonged conflict.

If the caliph consents to a longer-term peace or permanent border, he will be in error. Temporary peace treaties are renewable, but may not be applied to all enemies at once: the caliph must wage jihad at least once a year.

He may not rest, or he will fall into a state of sin. One comparison to the Islamic State is the Khmer Rouge, which killed about a third of the population of Cambodia. Even to hasten the arrival of a caliphate by democratic means—for example by voting for political candidates who favor a caliphate—is shirk. For the Islamic State, that recognition is ideological suicide. Other Islamist groups, such as the Muslim Brotherhood and Hamas, have succumbed to the blandishments of democracy and the potential for an invitation to the community of nations, complete with a UN seat.

Negotiation and accommodation have worked, at times, for the Taliban as well. To the Islamic State these are not options, but acts of apostasy. The United States and its allies have reacted to the Islamic State belatedly and in an apparent daze. Our failure to appreciate the split between the Islamic State and al-Qaeda, and the essential differences between the two, has led to dangerous decisions.

Last fall, to take one example, the U. The plan facilitated—indeed, required—the interaction of some of the founding figures of the Islamic State and al-Qaeda, and could hardly have looked more hastily improvised. Maqdisi had already called for the state to extend mercy to Alan Henning, the British cabbie who had entered Syria to deliver aid to children. In December, The Guardian reported that the U. Maqdisi was living freely in Jordan, but had been banned from communicating with terrorists abroad, and was being monitored closely.

After Jordan granted the United States permission to reintroduce Maqdisi to Binali, Maqdisi bought a phone with American money and was allowed to correspond merrily with his former student for a few days, before the Jordanian government stopped the chats and used them as a pretext to jail Maqdisi.

Multiple attempts to elicit comment from the FBI were unsuccessful. Chastened by our earlier indifference, we are now meeting the Islamic State via Kurdish and Iraqi proxy on the battlefield, and with regular air assaults.

Some observers have called for escalation, including several predictable voices from the interventionist right Max Boot, Frederick Kagan , who have urged the deployment of tens of thousands of American soldiers.

The Islamic State cannot. If it loses its grip on its territory in Syria and Iraq, it will cease to be a caliphate.

Caliphates cannot exist as underground movements, because territorial authority is a requirement: take away its command of territory, and all those oaths of allegiance are no longer binding. Former pledges could of course continue to attack the West and behead their enemies, as freelancers. But the propaganda value of the caliphate would disappear, and with it the supposed religious duty to immigrate and serve it.

If the state musters at Dabiq in full force, only to be routed, it might never recover. And yet the risks of escalation are enormous. The biggest proponent of an American invasion is the Islamic State itself. The provocative videos, in which a black-hooded executioner addresses President Obama by name, are clearly made to draw America into the fight. Yet another invasion and occupation would confirm that suspicion, and bolster recruitment. Add the incompetence of our previous efforts as occupiers, and we have reason for reluctance.

The rise of ISIS , after all, happened only because our previous occupation created space for Zarqawi and his followers. Who knows the consequences of another botched job? Given everything we know about the Islamic State, continuing to slowly bleed it, through air strikes and proxy warfare, appears the best of bad military options.

Neither the Kurds nor the Shia will ever subdue and control the whole Sunni heartland of Syria and Iraq—they are hated there, and have no appetite for such an adventure anyway. But they can keep the Islamic State from fulfilling its duty to expand. And with every month that it fails to expand, it resembles less the conquering state of the Prophet Muhammad than yet another Middle Eastern government failing to bring prosperity to its people. But its threat to the United States is smaller than its all too frequent conflation with al-Qaeda would suggest.

It sees enemies everywhere around it, and while its leadership wishes ill on the United States, the application of Sharia in the caliphate and the expansion to contiguous lands are paramount. The foreign fighters and their wives and children have been traveling to the caliphate on one-way tickets: they want to live under true Sharia, and many want martyrdom. Doctrine, recall, requires believers to reside in the caliphate if it is at all possible for them to do so.

This would be an eccentric act for someone intending to return to blow himself up in line at the Louvre or to hold another chocolate shop hostage in Sydney. But most of the attackers have been frustrated amateurs, unable to immigrate to the caliphate because of confiscated passports or other problems. During his visit to Mosul in December, Jürgen Todenhöfer interviewed a portly German jihadist and asked whether any of his comrades had returned to Europe to carry out attacks. The jihadist seemed to regard returnees not as soldiers but as dropouts.

Properly contained, the Islamic State is likely to be its own undoing. No country is its ally, and its ideology ensures that this will remain the case. The land it controls, while expansive, is mostly uninhabited and poor. And as more reports of misery within it leak out, radical Islamist movements elsewhere will be discredited: No one has tried harder to implement strict Sharia by violence. This is what it looks like. But we should watch carefully for a rapprochement.

By Jocelyn Brumbaugh. Latest Video. Marine returns home to surprise family for the holidays. Doorbell video helps police capture porch pirates.

Woman whose car was stolen off the side of highway surprised with new car. Mother, son fulfill kindergarten promise as they graduate college together. Slideshow Central. Pawleys Island PD. By Janice Limon. By The Associated Press. By National Desk Staff. PHOTOS: A look at this year's Tour de France AP PHOTOS: Withering drought shows Lake Mead boat graveyard AP Gallery: The first week at the Wimbledon tennis tournament AP PHOTOS: Supermoon delights skygazers around the world AP Gallery: As world marks Earth Day, trash still big problem AP.

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A binary option is a financial exotic option in which the payoff is either some fixed monetary amount or nothing at all. The former pays some fixed amount of cash if the option expires in-the-money while the latter pays the value of the underlying security. While binary options may be used in theoretical asset pricing, they are prone to fraud in their applications and hence banned by regulators in many jurisdictions as a form of gambling. FBI is investigating binary option scams throughout the world, and the Israeli police have tied the industry to criminal syndicates.

On January 30, , Facebook banned advertisements for binary options trading as well as for cryptocurrencies and initial coin offerings ICOs. Binary options "are based on a simple 'yes' or 'no' proposition: Will an underlying asset be above a certain price at a certain time? If a customer believes the price of an underlying asset will be above a certain price at a set time, the trader buys the binary option, but if he or she believes it will be below that price, they sell the option.

In the U. Investopedia described the binary options trading process in the U. If at p. This is called being "in the money". This is called being "out of the money". The bid and offer fluctuate until the option expires. You can close your position at any time before expiry to lock in a profit or a reduce a loss compared to letting it expire out of the money.

In the online binary options industry, where the contracts are sold by a broker to a customer in an OTC manner, a different option pricing model is used. Brokers sell binary options at a fixed price e.

Some brokers, also offer a sort of out-of-money reward to a losing customer. On non-regulated platforms, client money is not necessarily kept in a trust account, as required by government financial regulation , and transactions are not monitored by third parties in order to ensure fair play. Binary options are often considered a form of gambling rather than investment because of their negative cumulative payout the brokers have an edge over the investor and because they are advertised as requiring little or no knowledge of the markets.

Gordon Pape, writing in Forbes. com in , called binary options websites "gambling sites, pure and simple", and said "this sort of thing can quickly become addictive no one, no matter how knowledgeable, can consistently predict what a stock or commodity will do within a short time frame".

Pape observed that binary options are poor from a gambling standpoint as well because of the excessive "house edge". Let's say you make 1, "trades" and win of them. In other words, you must win The U. Commodity Futures Trading Commission warns that "some binary options Internet-based trading platforms may overstate the average return on investment by advertising a higher average return on investment than a customer should expect given the payout structure.

In the Black—Scholes model , the price of the option can be found by the formulas below. This pays out one unit of cash if the spot is above the strike at maturity. Its value now is given by. This pays out one unit of cash if the spot is below the strike at maturity. This pays out one unit of asset if the spot is above the strike at maturity. This pays out one unit of asset if the spot is below the strike at maturity.

Its value now is given by:. call is worth exactly one unit. The price of a cash-or-nothing American binary put resp. The above follows immediately from expressions for the Laplace transform of the distribution of the conditional first passage time of Brownian motion to a particular level. Similarly, paying out 1 unit of the foreign currency if the spot at maturity is above or below the strike is exactly like an asset-or nothing call and put respectively.

The Black—Scholes model relies on symmetry of distribution and ignores the skewness of the distribution of the asset. The skew matters because it affects the binary considerably more than the regular options. A binary call option is, at long expirations, similar to a tight call spread using two vanilla options. Thus, the value of a binary call is the negative of the derivative of the price of a vanilla call with respect to strike price:.

Skew is typically negative, so the value of a binary call is higher when taking skew into account. Since a binary call is a mathematical derivative of a vanilla call with respect to strike, the price of a binary call has the same shape as the delta of a vanilla call, and the delta of a binary call has the same shape as the gamma of a vanilla call. Many binary option "brokers" have been exposed as fraudulent operations.

Manipulation of price data to cause customers to lose is common. Withdrawals are regularly stalled or refused by such operations; if a client has good reason to expect a payment, the operator will simply stop taking their phone calls. On 23 March , The European Securities and Markets Authority , a European Union financial regulatory institution and European Supervisory Authority located in Paris, agreed to new temporary rules prohibiting the marketing, distribution or sale of binary options to retail clients.

The Australian Securities and Investments Commission ASIC warned Australian investors on 13 February against Opteck, an unlicensed binary option provider. In August , Belgium's Financial Services and Markets Authority banned binary options schemes, based on concerns about widespread fraud. No firms are registered in Canada to offer or sell binary options, so no binary options trading is currently allowed.

Provincial regulators have proposed a complete ban on all binary options trading include a ban on online advertising for binary options trading sites. On May 3, , the Cyprus Securities and Exchange Commission CySEC announced a policy change regarding the classification of binary options as financial instruments. The effect is that binary options platforms operating in Cyprus, where many of the platforms are now based, would have to be CySEC regulated within six months of the date of the announcement.

CySEC was the first EU MiFID -member regulator to treat binary options as financial instruments. In , CySEC prevailed over the disreputable binary options brokers and communicated intensively with traders in order to prevent the risks of using unregulated financial services.

On September 19, , CySEC sent out a press release warning investors against binary options broker TraderXP, who was not and had never been licensed by CySEC.

CySEC also temporarily suspended the license of the Cedar Finance on December 19, , because the potential violations referenced appeared to seriously endanger the interests of the company's customers and the proper functioning of capital markets, as described in the official issued press release. CySEC also issued a warning against binary option broker PlanetOption at the end of the year and another warning against binary option broker LBinary on January 10, , pointing out that it was not regulated by the Commission and the Commission had not received any notification by any of its counterparts in other European countries to the effect of this firm being a regulated provider.

OptionBravo and ChargeXP were also financially penalized. CySEC also indicated that it had voted to reject the ShortOption license application. In , CySEC repeatedly fined Banc De Binary for several violations including the solicitation of U. In August , France's Sapin II bill on transparency was announced by the Autorité des Marchés Financiers AMF , seeking to outlaw all financial derivatives advertising.

The AMF stated that it would ban the advertising of certain highly speculative and risky financial contracts to private individuals by electronic means. The French regulator is determined to cooperate with the legal authorities to have illegal websites blocked. This ban was seen by industry watchers as having an impact on sponsored sports such as European football clubs.

The Cyprus-based company 24Option [46] was banned from trading in France by AMF earlier in German Federal Financial Supervisory Authority BaFin has been regularly publishing investor warnings. On November 29, , BaFin announced that it is planning to "prohibit the marketing, distribution and sale of binary options to retail clients at a national level". According to the Commodity Futures Trading Regulatory Agency CoFTRA in Indonesia, also known as BAPPEBTI, binary options are considered a form of online gambling and is illegal in the country.

The move to delegalize binary options stems from concerns that the public may be swayed by misleading advertisements, promotions, and offers to participate in fraudulent practices that operate under the guise of binary options trading. In March binary options trading within Israel was banned by the Israel Securities Authority , on the grounds that such trading is essentially gambling and not a form of investment management.

The ban was extended to overseas clients as well in October In The Times of Israel ran several articles on binary options fraud. In July the Israeli binary option firms Vault Options and Global Trader were ordered by the U. The companies were also banned permanently from operating in the United States or selling to U.

In November the Israel Securities Authority carried out a raid on the Ramat Gan offices of binary option broker iTrader. The CEO and six other employees were charged with fraud, providing unlicensed investment advice, and obstruction of justice. On May 15, , Eliran Saada, the owner of Express Target Marketing , which has operated the binary options companies InsideOption and SecuredOptions, was arrested on suspicion of fraud, false accounting, forgery, extortion , and blackmail.

In August Israeli police superintendent Rafi Biton said that the binary trading industry had "turned into a monster". He told the Israeli Knesset that criminal investigations had begun.

In September , the FBI arrested Lee Elbaz, CEO of binary options trading company Yukom Communications, upon her arrival in the United States. They arrested her for wire fraud and conspiracy to commit wire fraud. In February , the FBI arrested Austin Smith, Founder of Wealth Recovery International, after his arrival in the United States.

Smith was arrested for wire fraud due to his involvement as an employee of Binarybook. In March the Malta Financial Services Authority MFSA announced that binary options regulation would be transferred away from Malta's Lottery and Gaming Authority. This required providers to obtain a category 3 Investment Services license and conform to MiFID's minimum capital requirements ; firms could previously operate from the jurisdiction with a valid Lottery and Gaming Authority license.

In April , New Zealand 's Financial Markets Authority FMA announced that all brokers that offer short-term investment instruments that settle within three days are required to obtain a license from the agency.

In the UK, binary options were regulated by the Gambling Commission rather than the Financial Conduct Authority FCA. They stated that binary options "did not appear to meet a genuine investment need". The Isle of Man , a self-governing Crown dependency for which the UK is responsible, has issued licenses to companies offering binary options as "games of skill" licensed and regulated under fixed odds betting by the Isle of Man Gambling Supervision Commission GSC.

On October 19, , London police raided 20 binary options firms in London. Fraud within the market is rife, with many binary options providers using the names of famous and respectable people without their knowledge.

The City of London police in May said that reported losses for the previous financial year were £13 million, increased from £2 million the year before.

In the United States, the Securities and Exchange Commission SEC approved exchange-traded binary options in AMEX now NYSE American offers binary options on some exchange-traded funds and a few highly liquid equities such as Citigroup and Google. On the exchange binary options were called "fixed return options" FROs. To reduce the threat of market manipulation of single stocks, FROs use a "settlement index" defined as a volume-weighted average of trades on the expiration day.

AMEX and Donato A.

In August Israeli police superintendent Rafi Biton said that the binary trading industry had "turned into a monster". Initiative Constitutional Amendment. Moises Velasquez-Manoff. Mollyann Brodie Executive Vice President and Chief Operating Officer Henry J. The sampling error for unweighted subgroups is larger: for the 1, registered voters, the sampling error is ±4.

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