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What are binary options

Author: William Berg
by William Berg
Posted: Dec 08, 2018
binary options

If you visit different finance and investing websites you will see a lot of advertising for binary options. They are often advertised as a quick way to earn a lot of money. In this article, we are going to take a closer look at what binary options are and if you really can make money trading binary options.

Binary options have developed from stock market betting games that you could play in certain casinos. The options have changed a lot since then but they are still a way to speculate on future market movements on the market. Today most trade is regulated by the Cyprus Security Exchange Commision but there are also brokers regulated by the Security exchange in Malta or by the FCA. Regulated brokers have to follow strict rules. There are unfortunately also some brokers who operate without a license. Most of these brokers are scams.

What are binary options?

Binary options are options based on an underlying asset. This asset can be a stock, a currency, an index or a commodity. The binary options broker that offers the option for sale acts as the option underwriter. There is no third party involved in the transaction. It is the asset that the binary option is based on that decides whether the option matures in the money or not. It is the market value of the asset that decides whether the option matures in the money or not.

When you buy a binary option you are speculating that the value of the underlying asset will be above (call option) or below (put option) a certain value at the time of maturation. If the value of the underlying asset is above (or below) that value at the time of maturation then the option matures in the money. If the option matures in the money then you are rewarded with a large profit. Often 80-90% of the invested amount. If the option matures outside the money then it is worthless and you lost the investment.

The goal with binary options trading is to skillfully choose the right options to buy to be able to make money.

Can you make money?

It is possible to make money trading binary options but it is a lot harder than the advertising would like you to believe it to be. 80-90% of all people who try investing in binary options end up losing money. Some lose a lot. Binary options have been banned in the EU due to the high number of people that lose money trading them.

All binary options are designed to make the broker money. The broker always has an edge and all options are more likely to mature outside the money then they are to mature inside the money. You lose all your money when the option matures outside the money but you only earn 80-90% return when the option matures in the money. This further increase the brokers' edge. You need to be able to pick options that mature in the money close to 60% of the time to make money.

The binary options broker only make money when you lose money. They want people to be able to earn money but they also want most traders to lose money. They need success stories to attract new customers but they also need to make money.

I do not recommend that you trade binary options but if you want to try then it is very important that you chose a good honest broker that give you a fair chance to profit from your trade.

Scam warning

There are numerous scam brokers on the binary options market. The scam brokers will manipulate trades to make sure that you do not profit. They will also refuse to allow you to withdraw your money from your account. Your money is lost once you deposited it to one of these scam brokers. You will never see it again. It is therefore very important that you only register with well-regarded brokers that are regulated by a well known financial institution. Never trade using unknown or unregulated brokers.

About the Author

Finance professional who likes writing about finance and pets.

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Author: William Berg
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William Berg

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Member since: Dec 08, 2018
Published articles: 16

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